Originally Posted by wayne_curr
I estimate joe made somewhere in the neighborhood of 250k last year!
I wish. Less than half of that, actually, after expenses.
I've come to learn that one of the ways in which the Fed has decided not to nurture and stimulate the growth of small businesses is by socking us with a bit of a double-whammy. In addition to the regular 28% income tax, we also get to pay the Self-Employment Tax, which is 12.4% of all earnings up to $106,800 plus 2.9% of all earnings with no upper cap. And, of course, this tax is figured on gross- no deductions. The only olive branch is that you do get is a 7.65% write-down on your gross, and the result of that calculation is used as the basis for the tax. But, you only get to claim half
of the amount you pay in SE tax as a deduction on your regular 1040 income tax. (Normally, things like state and local taxes are 100% deductible.)
Essentially, I get to pay for Medicare and SS at double the rate that a regular salaried employee would. So all told, my combined tax rate is about 43%, not counting deductions & write-downs, and the effective net tax rate works out to about 31%.
Originally Posted by Mach929
damn joe, once in my life i've written a single check for more than that, when i bought my house. It gave me a sick feeling.
The check I wrote when I bought my first house (and this was only six years ago) was smaller than this one. At least I was getting something in return for that one...
Originally Posted by shuiend
That check is for more then I make in a year. I really need to graduate from school and just get a real job.
It wasn't all that
long ago, when this was more than I made in a year, too. You'll start out as a wage slave, but if you can manage to carve out a niche for yourself (and make sure that your value is recognized as both crucial and also otherwise in demand), then after a few years you can start making demands.
If you're really good, and you've made the right connections, then you can quit and go freelance.
Originally Posted by Mobius
You need a better tax guy. Or a tax guy, period.
Funny you say that. This is the first year that, rather than using any software, I did my taxed on the raw IRS forms. I then made an appointment to visit an H&R office to have them reviewed. After looking over it all, the guy basically told me that I obviously didn't need his services.
I don't need a tax guy. What I do need is a good investment advisor.
Mobius, Y8s & Co. are correct however. Because I don't have a W-4, I have no withholding. So while most of y'all just get the taxes sucked out of your paycheck transparently throughout the year, I don't.
Technically, folks in my position are supposed to complete form 1040-ES and make quarterly estimated tax payments throughout the year. I specifically chose not to do this for 2009, because the penalty is only 2.66% of the underpayment, and the basis for the underpayment, in my case, is my prior year
tax liability. Since I was a salaried employee for the first two-thirds of 2008, and unemployed for most of the last part, my 2008 total tax liability was only $14,587, and thus, my total penalty (assuming I did form 2210 correctly) should only be $291.
Well, ****. I can earn more than that letting the money sit in a deposit account! (Or at least, I was, prior to SDCCU pulling the plug recently on its extremely lucrative money market accounts.)
For 2010, I expect I'll be making the payments, as my basis will have more than doubled, and I've lost my easy-money deposit shelter.
Originally Posted by reddroptop
35k in Federal tax and estimates of 250-500k income?
**** US taxes are cheap.
No, everybody has just over-estimated my income.
Our base income tax rates are:
$0 to $8,374 = 10%
$8,375 - 33,900 = $837.50 plus 15% of the amount over $8,375
$34,000 - $82,400 = $4,681.25 plus 25% of the amount over $34,000
$82,400 - $171,850 = $16,781.25 plus 28% of the amount over $82,400
$171,850 - $373,650 = $41,827.25 plus 33% of the amount over $171,850
$373,650 and up = $108,421.25 plus 35% of the amount over $373,650
And, I'm paying extra tax because I'm not a corporate drone. However, I have no state tax for 2009 because I was living in Florida the whole year. I guess they figure that most of our residents pay enough provincial tax to you guys.