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hellerluke14
New Member

I recently started working for shipt part time, making about $150 a week pre tax. How much should I be saving per paycheck in order to pay for taxes?

As a shipt worker I am considered self employed and no taxes are withheld. I am tracking all my miles for shipt and will be able to figure out how to file my taxes, but have no clue what they will really be when it comes time for filing. 

7 Replies
Carl
Level 15

I recently started working for shipt part time, making about $150 a week pre tax. How much should I be saving per paycheck in order to pay for taxes?

When self-employed you are required to make quarterly estimated tax payments. While there are "tools" out there to help one figure out how much they need to send the IRS each quarter, it's a waste of your time to use them. The general rule is, if you send the IRS 20% of your *gross* earnings each quarter, then come tax filing time you'll be fine. If your state taxes personal income that same general rule holds true for state quarterly taxes also.
For your vehicle mileage, be aware that commuting miles between your place of residence and your primary place of employment are never deductible.
hellerluke141
New Member

I recently started working for shipt part time, making about $150 a week pre tax. How much should I be saving per paycheck in order to pay for taxes?

Thank for the help! I live in Michigan and they tax my income. So you’re saying I should plan on 40% of my income going to taxes? (20 for irs and 20 for the state)
SweetieJean
Level 15

I recently started working for shipt part time, making about $150 a week pre tax. How much should I be saving per paycheck in order to pay for taxes?

20% is too high for state. The maximum rate in MI is 4.25%
hellerluke141
New Member

I recently started working for shipt part time, making about $150 a week pre tax. How much should I be saving per paycheck in order to pay for taxes?

Also, is the self employment tax (about 15%) separate from the federal income tax?
SweetieJean
Level 15

I recently started working for shipt part time, making about $150 a week pre tax. How much should I be saving per paycheck in order to pay for taxes?

Yes it is.
Carl
Level 15

I recently started working for shipt part time, making about $150 a week pre tax. How much should I be saving per paycheck in order to pay for taxes?

What you withhold/send to the state depends on what state one is in, as not all tax personal income at the same rate as federal. The 20% I recommend includes SE tax on the federal side. Now at tax time your overall tax rate will actually be higher than 20% with SE tax included. But I recommend 20% on the *gross* business income. Then at tax time when you file, your potentially higher tax rate will be on your net profit *taxable* business income, which is determined after all your business deductions.
So for example, if your gross income is $20K per quarter ($80K for the year) you'd send the IRS $4K per quarter, which comes to $16K for the year. THen when you complete the SCH C at tax time and figure in the business expense deduction, depreciation and the such, your taxable business income may only be $50K at a 22% tax rate for standard normal taxes, and the additional 15.2% for the self-employment tax. Then 37.2% of $50K would be $18,600. That means at tax filing time you owe the IRS an additional $2,600 for taxes. Now the one thing I didn't figure in here because I don't fully understand it, is where there's some kind of a tax break of some sorts, on the first 20% of taxable business income. But so long as what you owe at tax time is under 10% or $1000 (whichever is higher) of your entire household tax liability, no underpayment penalties are assessed.
I've been doing this in my business for 12-13 years now, and I've always been within $500 of my tax liability every year. Some years I owe, and it's always less than $500 for me. Some years I get a refund, and that too is always less than $500. IN all these years the most I've ever had to pay at tax filing time if I owed, was $472.
VolvoGirl
Level 15

I recently started working for shipt part time, making about $150 a week pre tax. How much should I be saving per paycheck in order to pay for taxes?

Yes.  Some general info.  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

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 line 27 of the 1040.  The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 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

PAYING ESTIMATES
The first year you don't need to pay estimates as long as you pay in (by withholding) as much as your tax was last year.  But if you will have a big income you should send in estimates so you don't owe too much next April on your tax return.

You must make quarterly estimated tax payments for the current tax year if both of the following apply:
- 1. You expect to owe at least $1,000 in tax for the current tax year, after subtracting your withholding and credits.
 
- 2. You expect your withholding and credits to be less than the smaller of:
    90% of the tax to be shown on your current year’s tax return, or
  100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

To prepare estimates for next year you start with your current return, but be careful not to change anything.  For Online versions, if you can't get back into your return, Click on Add a State to let you back into your retun.

You can just type W4 in the search box at the top of your return , click on Find. Then Click on Jump To and it will take you to the estimated tax payments section. Say no to changing your W-4 and the next screen will start the estimated taxes section.

Or Go to….
Federal Taxes or Personal (Desktop H&B)
Other Tax Situations
Other Tax Forms
Form W-4 and Estimated Taxes - Click the Start or Update button

The 1040ES quarterly estimates are due April 17, 2018, June 15, Sept 17 and Jan 15, 2019.  Your state will also have their own estimate forms.

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