topic 2020 taxes 1099 contractor in Get your taxes done using TurboTax

2020 taxes 1099 contractor

duncammeg55 — Wed, 18 Dec 2019 22:27:09 GMT

I will be starting a new position in January. My status will be 1099 contractor (independent). I know I will need to set aside for self employment tax. I'm wondering how much I should set aside. I will be paid $50/hr for 40 hours. I'm planning on setting aside around 35-40%. Is that a reasonable amount. Also when are the quarterly payments due.

Re: 2020 taxes 1099 contractor

KittyM2 — Wed, 18 Dec 2019 23:05:35 GMT

You need to set aside 15.3% for Self-Employment tax, and then an additional amount for income taxes. It looks like you expect to earn around $104,000 in 2020. Depending on your expenses, you could end up in the 12% or 22% brackets, but that won't be on every dollar you earn, because of the standard deduction.

Sometimes it can be hard to save large amounts like 37.3% of your pay. Be sure to transfer your taxes to a savings account before you start spending your checks.

Quarterly estimated payments are due April 15, June 15, September 15, and January 15 of the following year. (2021 for 2020.) You can make the payments online at www.irs.gov

Re: 2020 taxes 1099 contractor

VolvoGirl — Wed, 18 Dec 2019 23:09:38 GMT

Some general info on self employment...........

You will need to keep good records. You may get a 1099Misc at the end of the year if someone pays you more than $600 but you need to report all your income no matter how small. You might want to use Quicken or QuickBooks to keep track of your income and expenses.

There is also QuickBooks Self Employment bundle you can check out which includes one Turbo Tax Online Self Employed return....

http://quickbooks.intuit.com/self-employed

When you are self employed you are in business for yourself and the person or company that pays you is your customer or client.

To report your self employment income you will fill out schedule C in your personal 1040 tax return and pay SE self employment Tax. You will need to use the Online Self Employed version or any Desktop program but the Desktop Home & Business version will have the most help.

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment. You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400. The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare. So you get social security credit for it when you retire. You do get to take off the 50% ER portion of the SE tax as an adjustment on Schedule 1 line 27. The SE tax is already included in your tax due or reduced your refund. It is on the Schedule 4 line 57. The SE tax is in addition to your regular income tax on the net profit.

Here is some IRS reading material……

IRS information on Self Employment

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

Pulication 334, Tax Guide for Small Business

http://www.irs.gov/pub/irs-pdf/p334.pdf

Publication 535 Business Expenses

http://www.irs.gov/pub/irs-pdf/p535.pdf