Hello! I am a Mental Health Therapist. I opened my own Practice (PLLC) in January in Texas. My case load is starting to grow and I would like to know what sort of percentages I should be putting to the side for when it's time to pay into taxes. For example when I worked for a company they took automatically took out for whatever Texas taxes were (social security, etc.).
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As a contractor, you are considered Self employed. Yes your income and expenses will be included in your individual tax return. TurboTax does a great job of guiding you through your taxes in TurboTax Self Employed https://turbotax.intuit.com/personal-taxes/online/premium/
Also https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center will walk all about how to file etc. TTonline does it easily and we also have experts that can complete your taxes for you!
Here are some great links with videos that are very through in explaining. https://turbotax.intuit.com/tax-tips/self-employment-taxes/the-self-employment-tax/L8xXjolB4
With being self employed your income after expenses will be taxed both self employment tax and Ordinary income tax.
You are expected to pay estimated taxes throughout the year. Here is a link to help with that. Since you do not have throughout the year, the IRS and state (lucky in Texas we have no state income tax) encourage you to pay throughout year. Then you would enter those payments in your individual tax return.
Thanks for joining us today!
Janet CPA
Janet CPA
Hello Rajamubeenali,
Thank you for participating in the Ask the Experts event. As to your question, assuming you will be reporting your business activity on a Schedule C in your individual 1040 return, I always tell me clients to set aside at 25-30% of their net income for taxes. Right off the bat you will have 15.3% of your net income for the self-employment tax.
Then, that net income will also be taxed at your ordinary income tax rate according to where you fall in the income tax brackets and your filing status. There are deductions you can take for half the self-employment tax and qualified business income, so the 25-30% number is conservative as you also want to consider state taxes.
I hope that helps.
ide from the more complex situations
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