When Do You Start Paying Tax?

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When Do You Start Paying Tax?

Have you started doing self employed jobs and want to know when do you start paying tax?

In this article, we will give you general guidance so that you have your tax ducks in a row.

Disclosure: This post contains affiliate links and I will be compensated if you make a purchase after clicking on my links, there is no extra cost to you

 

When Am I Eligible For Self Employed Tax?

The simplest answer is after you start receiving your first payments in your self employed business you should register for self employed tax.

Whether Non-W2 Employed means you receive a 1099 form for individual contractor work or you don’t receive any type of form since you’re self employed, you still must worry about taxes.

As you don’t have a company taking out taxes for you, you have to ascertain how to pay yourself.

The two main steps for figuring out your tax rates are as follows:

 

1) Determining Your Tax Bracket

The US government taxes your income, as do states.

Learn more about the current income thresholds for tax by visiting

 

2) Finding Your State Tax Bracket

Additional to Federal Income Tax, you also need to consider the Income Tax imposed by your state.

This varies, of course, from nation to nation, but I discovered a fantastic calculator for this too: TaxFormCalculator.com\StateTax

    • Once you click the link, you may either select your nation in on the left-hand column on the page and after that enter your annual gross income.
    • Or you can find your country and click on the number on your states row that’s close to your annual income.
    • You have to scroll down to find the results after you hit compute, however, there is a lot of information packaged in the calculator results.
    • For example, your daily, weekly, and yearly income amounts, and your federal tax fee.
    • Illustration: You make $25, and live in Colorado. In accord with the calculator, the nation taxation is 4.63%.
    • But, since Colorado taxes by state, county, city, AND county district, the actual taxation fee will be more than that.
    • You have to take 20% of that income, also place it in a savings account (this is a general figure that works well in most cases).

 

 

Savings Accounts For Starting To Pay Tax

When it comes to figuring out when do you start paying tax it is a smart idea to set up a separate savings account.

Put a percentage of your earnings into that account so that you don’t get caught out later.

Pro Tip: An account at Capital One 360 takes a few days to set up for a self employed individual.

Or you can use the savings account at your bank is just fine if it means you will start saving now instead of next week.

 

Paying Taxes 

So by now you are dutifully putting 20% of your income in savings every time that you get a paycheck, and watching the balance grow.

Between now and Apr 15th, you’ve two options for paying your taxes.

You are able to leave the money there and utilize it to pay your tax bill whenever you get it once filing you taxes.

You’ll get an invoice once you file your taxes, and you may pay it in your tax savings account.

Whatever is left may be used however you’d typically use a tax refund.

For self-employment, you are able to pay estimated taxes, which is generally the better plan.

Paying estimated taxes is usually the better plan since the various governments you pay taxes to will send you fewer notifications and letter if you pay on a regular basis.

Thanks for reading this overview I hope it helps you to understand more about when do you start paying tax.

 

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