The easiest method to keep up with estimated taxes from your side venture:
- Set a time each month for you "Board Meeting"
- For example, third Sunday of the month 4 PM to 5:30 PM
- Keep track of your revenue and expenses in a file folder
- The major miss for self-employed taxpayers is failure to track expenses
- At the end of each month, total up your profit
- If your W-2 job does not take you to the 2023 Social Security maximum of $160,200, you will owe 15.3% self employment tax on the profit
- You will also owe income tax on the profit, most likely at your Marginal Tax Rate
- You can locate your Marginal Tax Rate at the bottom of your 2022 Tax History Report in TurboTax
- So if you are in a 12% marginal tax bracket, you add 12% plus 15.3% and deposit 27.3% of your profit in accordance with IRS "When to Pay Estimated Tax":
January 1 through March 31 period, make deposit on April 15
April 1 through May 31 period, make deposit June 15
June 1 through August 31, make deposit September 15
September 1 through December 31, make deposit January 15
Regarding a Self-Employed 410 (k), you may have multiple 401 (k) plans and there are contribution limits based on the specific characteristics of the two plans. The specifics of your situation with respect to the pension plan at W-2 work and the set up of your Self-Employed plan would need to be reviewed carefully.
