A cool 1099 tax calculator
One of the mildly tricky things about going 1099 is that you have to be more pro-active about paying your taxes.
This requires you to estimate your income for the year, calculate the amount of taxes you will owe, and then pay your estimated taxes every quarter.
In my book, I suggest just setting aside 30% of your 1099 payments for your estimated taxes and then settling up at tax return time. Once you do your tax return you'll know whether you overpaid or underpaid.
BUT, for those of you want to get a little more accurate, you can use this cool self-employment tax calculator I found by Keepertax.com.
Keepertax Self-Employment Tax Calculator
Let's say you are single and and bill around $150/hour. If you work 1800 hours per year, that is $270,000 in revenue annually, or $22,500 per month. Let's also say you pay $1,000/month in health insurance and other business expenses.
That leaves us $21,500 per month.
I'll punch that in to the calculator along with my filing status and state of residence (single and Virginia for this example) and the calculator shows I will need to set aside approximately 34.31% of my self-employment income for taxes, or $100,862 annually.
This means each month you should try to set aside $100,862 / 12 = $8,405.17 for taxes.
I've had some "surprise" tax bills because I estimated incorrectly. Tools like this calculator should help you avoid having to find an extra $10,000 at tax return time.
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