Have Tax Questions? Ask a Tax Expert for Answers ASAP
Do you have any expenses to offset that 1099 income? That's the majority of your tax issue.
Hi Rob,Okay, it looks like you might not be keeping track of all your records, and are kind of new to this. The reason I say that is it darn near impossible to answer your question without knowing your tax situation. Do you own a home and have mortgage interest so that you can itemize your deductions, if so what are those amounts?You see the difficulty in trying to do this through this forum. However, I have had real good luck sending customers to a website where you can plug in numbers, kind of see what's really going on. After that, usually the person will have questions and i be glad to answer them after you have used a tax calculator. They are very convenient, fast, and easy to use. One of the better ones you can find by clicking hereMake sure you click on each item' button. For instance "income" will expand when you click on that button.I'd gladly answer any questions you have after getting a general idea of where you stand.
Hi Rob,Your are right. That link didn't work. anyways here is the URL:http://www.dinkytown.net/java/Tax1040.htmlOkay, so let's do some rough justice. The self employment tax alone is 15.3 percent.So let's say you get your expenses up to 10,000, you'll then have 40,000 X 15.3% = 6,120 for that tax alone.you still owe ordinary tax on that at what u would roughly guess at a marginal tax rate of about 29% so 40,000 * 20% = 8,000So you have 8,000 + 6,120 = 14, 120 in taxes due for your business income alone.With roughly ordinary taxable income of around 100,000 X 27% = 27,00027,00014,12041,120So how much have you paid in so far though your W-2 income? The 1099 income doe not withhold any taxYou are also subject to 9.3% CA state tax.I think it; best you speak with a professional so you can get this all worked out and develop a tax plan. That may or may not include Incorporating, or forming a LLC. Generally in your situation, forming those entities really do not save you much in overall tax due, but does give you some legal protection.Right now, I would change your W-4 from your job to 0 so that the max is withheld.You need to consider making estimated taxes as well.These are paid by using 1040 EShttp://www.irs.gov/pub/irs-pdf/f1040es.pdfIt looks bleak. I know it does, but there are many many different options available for you to reduce your tax liability. The best way to do that is to sit down with a tax professional, hopefully a good one, I can give you a name in San Francisco, as I am in Sacramento, but this is an absolute must. I haven't mentioned AMT which is Alternative Minimum Tax, another area that you may be subject to.Let me now if you would like a referral. This is extremely important because as I'm sure you heard, let us bean counters do your tax planning and prepare your taxes for you, while you do what you do best, ***** ***** make money, and focus on that.Let me know how you would like to proceed, okay?
Hi, Rob,Setting aside a third, considering your tax situation, generally is a good rule to follow.I'd bump it up a little consdering California income tax rate. I think that is 9.3%Consider put this money into a Money Market Fund, or a CD, both short term. Pay Pal (Not FDIC insured) is paying just over 5%, and that is where I park my temporary funds. A short-term CD (usually FDIC insured) is another option so you can at least earn interest on this money you are saving to pay tax. Then you get to pay tax on the interestThere are many other avenues to consider, or you can hide money in your mattress too...whatever works because you will have money to pay your tax bill.I placed a few calls today to some CPAs and other professionals in San Francisco. Since it is the weekend, I probably won't hear from anyone until Monday. Since I specialize in Schedule C taxpayers (which you are with your business income), I look for professionals who know your industries, musicians and web designers.The 1099 income must be offset more than the 10,000 I used. There are ways to get this self-employment net income reduced which reduces tax liability. That is why I want you to talk to a professional who knows your industry.The spreadsheet attached shows that if you borrowed 400,000 for a home (yes I know the current market) your payment is almost exactly as your rent. Your rent is not tax deductible, your mortgage interest is. This allows you to itemize your deductions now. These are deductions you normally cannot deduct without mortgage interest.Estimating your itemized deductions compared to the standard deduction, you should receive an annual benefit of the very least 15,000 in deductions X 28% = 4,200 in tax savings. That is just a start. I did not even address your 1099 self-employment income.If you use Excel, you can retrieve some excellent free templates/calculators straight from the Excel search box.One is below, and a calculator on a mortgage. Again, this is only one method. I will get back y you on that referral, and by the way, it's illegal for me to accept money for any referral fees, just so you know.