How much do I charge for taxes as a private chef for both federal and California?

[VolvoGirl · Accepted solution]

Will you be filing taxes as self employment or did you set up a business entity like a LLC or Corp.?

If you are self employed you pay about 15% self employment tax on your Net Profit.  You don't need to charge your clients a separate tax but you can include it in your price.

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

You will need to keep good records.  You may get a 1099NEC 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.

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

You pay Self Employment tax on $400 or more of net profit from self-employment in addition to any regular income tax.  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.  

PAYING ESTIMATES

You may need to send in quarterly estimated payments to cover any self employment tax and increase in income.

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).

[jpackar]

Is there another benefit to becoming an llc over self-employed aside from liability?  Anything better with taxes as an llc?

[Opus 17]

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@jpackar wrote:

Is there another benefit to becoming an llc over self-employed aside from liability?  Anything better with taxes as an llc?

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No.  A single member LLC files the exact same tax return as an unincorporated sole proprietor.

If you are wondering how much to ask for your services, you probably want a premium of 20-40% compared to being on salary, although that can vary widely with the type of job.

My own employer tells me that my benefits (legally required government benefits, plus medical insurance and retirement contributions) cost them an additional 40% more than my stated salary. 

Your state and federal income tax will be the same either way, but you will pay an extra 7.65% social security if you are self-employed (compared to being an employee) and you have to make your own arrangements for health insurance and retirement. 

[jpackar]

As a Private Chef in California, what would be the total % for the state and the total % federally?  

[Opus 17]

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@jpackar wrote:

As a Private Chef in California, what would be the total % for the state and the total % federally?  

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There's no singe answer.  Federal tax rates are 10%-36% depending on income level.  California's income tax rate is up to 13%, depending on income level, and also depends on whether you will be filing as single, married, or head of household.

Federal tax brackets are here https://www.nerdwallet.com/article/taxes/federal-income-tax-brackets

California tax brackets are here. https://www.tax-brackets.org/californiataxtable

You will pay the same income tax whether you are a salaried employee or self-employed independent contractor.  

[jpackar]

As a self employed independent contractor should I become a s-Corp or llc for better tax rates?

[Opus 17]

As a single member LLC you would pay exactly the same income tax.  S-corps are very complicated and you could lose significantly in other ways if you do it improperly.  I suggest expert professional assistance.