The Money Book for Freelancers, Part-Timers, and the Self-Employed: The Only Personal Finance System for People with Not-So-Regular Jobs by D'Agnese Joseph & Kiernan Denise

Author:D'Agnese, Joseph & Kiernan, Denise [D'Agnese, Joseph]
Language: eng
Format: mobi
Publisher: Crown Business
Published: 2010-02-22T16:00:00+00:00

SETTING IT UP

Open a Tax Account at your online bank. Give it an appropriate nickname, perhaps something mildly profane, if that helps you channel your anger about paying out your hard-earned dough to The Man. Once that’s done, it is time to decide just how much you need to set aside for your taxes out of each check.

There are two main ways to figure this out:

Ask a professional.

Do the math.

ASK A PROFESSIONAL

We suggest getting help. (See “Reaching Out for Help”.) We asked our tax man, based on our most recent returns, to tell us how much we needed to set aside in order to cover our taxes. Based on past earnings and taxation, combined with projected income, he gave us a ballpark number. But that’s just the beginning.

Asking your guru what you should set aside based on past experience is not enough. What we make year to year changes, so while that initial estimate provides guidance from January through March, we have quarterly conversations with our tax man about how much we’ve earned and how much we think will come in the door down the line. If necessary, we can adjust what we set aside that year as we move forward.

So sit down with your new best friend and ask him or her: On average, what percentage of my annual income is going to pay for all of my taxes? Specifically, what am I paying for city, state, and federal taxes, and your fee on top of it? He or she should be able to give you an average percentage based on your last three years of tax returns.

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