I get paid every month for contract labor, inwhich they do not take out taxes. How do I find out how much tax I will have to pay at the end of the year? It averages out to be about $702.28 a month. Also can I pay the taxs on this each month and where?
Since you are working as contract labor and not having taxes withheld, the ones who are paying you should give you a Form 1099-MISC by next January 31, 2007. That form indicates to IRS and your State that you are self-employed and will be subject to Income Tax plus self-employment tax on the profits from your business. That $702.28 a month will amount to about $8,427 for a whole year. Considering the fact that we don't know your filing status and other income you may have involved, its impossible to tell you how much Federal tax you will pay at the end of the year. That self-employment tax I mentioned is at the rate of 15.3% of the profit from your business. For the $8,427 that would amount to $1,289 plus Federal income tax on that amount (again dependent on your filing status and other income). You would also need to consider State Income Tax if your resident State has a personal income tax. We also cannot tell in what State you reside.
Federal income tax and the self-employment taxes should be estimated and paid 4 times in a year. These payment due dates are April 15, June 15, September 15, and January 15. These taxes would be paid with a Form 1040ES-an estimated tax form.
It would be to your advantage to engage the services of a local tax professional. They will be better able to help you minimize your taxes and make sure you timely file and pay these various taxes. They will be able to save you much more than you'll have to pay them By tax professional, I don't mean someone who is a part-time tax preparer at any of the commercial income tax preparation services.Wayne Brasch38858.8996359143