I know its probably small pennies for y'all, but I got picked up to do about 2000$ in contract work(10-99 im assuming) for a friends company. I have never done anything like this before, and want to set aside enough to cover tax at the end of the year. The rest is going in to a laptop and to expand my print capability.

I only gross ~45k a year from my current w-2 employer( this job may lead in to more opportunities...), can anyone point me at how to figure tax burden on this money? My plan is to withhold in a higher yield savings account( might as well make a few $$) whatever i SHOULD have to pay on it, and see where my tax return/refund situation shakes out come tax season( and yeah I know its next to nothing... yet...)

I watched my dad get in a lot of trouble with the IRS in the 80s, I try not to screw things up.

You can calculate how much money you'll need to pay in taxes with online calculators.

I make more from my normal job but I do consulting on the side. I pay 25% of my consulting money when I get it to the IRS to ensure I'm not getting into trouble. Technically you need to pay estimated quarterly taxes. I used to do that but it's easier to pay when you get paid.

I'd do 10% and get the money back when you file.

As others said, keep expenses and such and deduct when you file. You'll probably get the money back, but you'll have given the government their cut.

~egon

I'd increase your "advertising" budget in an effort to attract more clients....

Don't be afraid to sock away a sizable amount in a SEP IRA if you want to further minimize your taxable income.

I would make quarterly payments to the irs on what you believe will be taxed to minimize the chance of penalties.

Kurt Gowdy said:

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I'd increase your "advertising" budget in an effort to attract more clients....

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I was approached kind of out of the blue on this, I really wasnt advertising. The project im attached to needed a specific set of skills that got them talking to me, this project was a trial run at maybe becoming a more consistent part ofnthe companies dev team, and they want it to eventually turn in to a full time gig.

Im still in a little bit of shock, it's only kinda sorta adjacent to what I've been doing for many years as a regularl hourly job. Im not complaining, I just never thought it was a possibility...turns out being a specific kind of nerd for most of my life might pay off!

You will owe tax based on your marginal income tax rate and will have to pay fica tax on most if it. Assuming you can't write off any business expenses it will likely be around $500.

Laptop and print stuff should be a business expense you can write of if it has to do with the consulting work. BUT I am no expert.

As others have said, your laptop, printer (along with toner and supplies) will be a deduction. On a $2,000 gross, I would not worry with estimated tax payments. Over time, if that 1099 income increases, you might have to consider that or increase you W-2 income tax withholdings.

You might also look to see if your situation would mean you can take an office in the home deduction, mileage, etc.

Congratulations on someone recognizing your skill set! Good luck to you.

Look for anything that you can deduct as a legitimate business expense from the $2000 revenue as others have mentioned. This is where you try to minimize your tax obligation legally by showing your overall profit being as low as you can reasonbly get it ON PAPER.

Business Expenses include; travel, mileage, office expenses (toner, paper, etc..) Section 179 Depreciating the laptop, printer or other allowable assets in the year you buy them is allowed if you meet the criteria. Deduct home office space if you meet the rules. A one time $2000 gig can be offset pretty easily to a net 1099 loss buying a new laptop and printer if you want to go fancy. Thus the loss ON PAPER because you still have ownership of the laptop and printer.

Once you look at revenue - business expenses you can decide if you want to contribute a percentage of profit (if there is any) to a SEP or SIMPLE IRA. That locks the money up per IRA rules but many doing 1099 on the side don't need the cash now due to other full time revenue streams so they park it there long term for retirement and to help with tax liability right now.

At this point you can figure out what you owe the IRS. Fed Tax (marginal tax rate X net profit after expenses and tax deductions) plus the emploiyee portion (you) of FICA + the employer portion (you as a 1099) of FICA.

The IRS wants you to pay that amount to the US Treasury quarterly based on your oveall 1099 numbers each quarter with a few exceptions. If you don't meet the rules then they will add an underpayment penalty.

You will owe 15% of your gross NOT your net. Thats approximately your social security and Medicare taxes. No deductions for any reason. If you received a refund off your W-2 last year that will help cover any income taxes off your 1099 income.

Welcome to the 1099 world. I've Been here most of the last 23 years.

Oh and your best write off is mileage. Keep track of it .

Thank y'all for the help, sounds like i need to sit down and start documenting better going forward.

I've never written anything off except the interest on a car loan last year. If I've bought something that im using for legitimate business usage, but am also using for personal projects, how much has to be business only to claim it? I purchased this 3d printer with the intention of doing some print farming, but now will be doing quite a bit of iterative prototyping with it. When its not busy with that im usually making models to paint... can I still claim it( or a portion thereof)? Same will go with a new laptop.

Again thank y'all. I feel like a dope at 40 asking tax questions like these, but I've never had to file anything more complex than my HSA contributions and withdrawals.


The good news is, it looks like I wont have to have the numbers together until September. I think im going to take the safe route and start putting 25% in savings anytime I get payed on it. If the numbers all add up to not needing to pay that much, cool.... little money in savings, but my really rough estimate says that should be about the rate before any deductions.

25% savings should cover your liability. I don't like getting IRS refunds. I do not like to loan the government money for free.

I feel the same way tbh, this is just new to me and I don't want to start out wrong!

You won't go wrong at saving of 25% gross of total revenue.