Question

How do you all manage your taxes as independent contractors to ensure proper quarterly payments and avoid any tax penalties? I have developed an excel spreadsheet, but can't seem to figure out the proper percentages to set aside for taxes nor how to keep up. This is for my personal business doing fill in work through multiple clinics. My goal is to set aside a certain amount every paycheck to ensure I have enough remaining for taxes.  

Answer 1

I suggest a minimum of 30% - you're subject to income tax rates and 15. 3% for self employment taxes. It may or may not be too much (depends on if you have any W-2 income, spouse with W-2 income, your income tax rate, etc), but that's usually my ballpark suggestion. Worst case, you have extra saved. If you file quarterlies, it's sort of a moving target. If you underestimate your income with your first quarter, and then project it higher later, you have to catch up the extra taxes that you missed the first quarter, etc.  

Answer 2

25% is what I was alway told. I used to put it in a separate saving account and don’t touch.  

Comments

@campanile any high yield savings accounts you might recommend?  

Answer 3

I take what I paid last year in income & sales tax and divide it by 12. My income varies, so I pull that set amount from savings (1) into a different savings (T) account each month. Any extra from the biz goes into savings (1) monthly. I specifically pull from savings (1) rather than checking in case it’s a light month.