Contract Taxes

[Kelvinv90]

Hi, this year I became a music producer for an energy drink company (part time)

However they don’t take taxes out of my pay.

I know they will give me a tax form but I’m unaware as to how much I will have to pay (California)

and… what is a write off and how do I go about using them?

[AdamNe]

Hello @Kelvinv90 !

In this scenario, you will most likely be receiving a 1099-NEC for your income. This means that on your next tax return, you will be filing a "Schedule C" which is the form for self-employed taxpayers. Don't worry, TurboTax will do all the hard work filling out the forms, all you will have to do is enter your 1099-NEC and answer questions about your new business activity. 

As for how much you will have to pay, you should enter all your income by type in our TaxCaster to get an idea about how much you will expect to owe. As a general rule, you will pay income tax at your usual tax rate, PLUS you will owe 15.3% self employment tax on your net self employment earnings. 

To arrive at what your net will be, you will take your total income and subtract your expenses. In general, any money that you spend in order to be able to make the income you are reporting is a deductible expense. For example, software subscriptions you use for your music producing, musical instruments, computer equipment, etc. If you have to drive somewhere to do the job, you can also deduct your mileage or vehicle expenses. Finally, if you use a part of your home as a home office, you may be able to deduct home expenses such as rent or mortgage, utilities, property taxes, etc. 

[candaceat]

Hello,

Looks like Adamne beat me to responding but here is some helpful information that I found as well. Hope it helps! 

First of all what an exciting new job! When taxes aren't withheld it's always a good idea to anticipate what you'll have to pay. If you have an idea of how much you'll make this year then you can use a tax calculator to help estimate your tax. 

Here is a tax calculator for the state of California: https://webapp.ftb.ca.gov/taxcalc/?Submit=2020+Tax+Calculator&Lang=english&redirectURL=OTC

Here is a tax calculator for Federal tax rates: https://turbotax.intuit.com/tax-tips/self-employment-taxes/a-guide-to-self-employment-taxes/L8RSXVAW....

If you anticipate owing $1000 or more in Federal taxes then it is a good idea to pay estimated taxes and avoid penalties. 

You also mentioned write-offs. Write offs are business expenses and they can vary greatly depending on the job. If you are considered a freelancer or a self employed individual then it's good practice to keep records and receipts for any "ordinary and necessary" expenses you have related to your business. That could include, but is not limited to equipment, insurance, a home office, vehicle expenses, bank fees, and advertising. When tax time comes the self employment section of TurboTax will guide you through the various expenses that you can claim. And the more expenses you have the lower the tax! 

I wish you the best on your new job!