If I make roughly 11,000 in self employment income how much federal income tax do I owe?
This is my first year in business for myself and I know about self employment 15.3% tax but the federal income tax confuses me. I don't really have any expenses to write off for my business and I'm single and 24 years old. I'm obviously going to be talking to a professional come tax time... But I want an estimate to alleviate stress. Any help is appreciated!
Aren't I a likely audit target for having that much deduction on a schedule c? I'm not hiding anything but I don't want to deal with an audit at all because they don't sound fun. And I thought you couldn't take a standard deduction if you were self emloyed...
11,000 less 1/2 of SE tax, less $5700 standard deduction, $3650 personal exemption leaves you $872 of taxable income or about $87 in income tax.
Add that to the $1554 SE tax and you'll owe $1641.
The forms aren't that difficult if you have nothing to deduct--so do them yourself and save $300.
Around $1600 for self employment tax for social security and medicare, and probably nothing for federal income tax - the small amount you'd owe for federal income tax will be wiped out by the Making Work Pay credit. This assumes this is your only income, and you are not a dependent.
Depending on where you live, there might be additional amounts for state and/or local taxes.
Your standard deduction goes on the 1040 form, not on schedule C, and you can take it whether you are self employed or not.
you say you have no expenses to reduce your gross?
your SE tax will be $1554.25
if this is your ONLY income then your personal exemption, $3650 and standard deduction, $5700 will reduce your taxable income to $1650 and that will cost you $165
as self employed you are paying your own mandated taxes, SS and Medicare(almost)
you can see the 2008 forms at www.irs.gov(the 2009's are not ready yet)
for Sch C and Sch SE
you can get an idea what is needed to complete them
you don't sound like you need professional help
PLEASE talk to a tax professional come tax time - the IRS is going to start really cracking down on Schedule C filers this year. (Too many people fudging their income and expenses trying to get the largest refund they can... legally or not.)
Anyway... federal income tax depends on adjusted gross income after expenses, deductions, and exemptions. Running with your estimate of $11,000 and only taking off standard deduction for single and one exemption, I came up with $166 federal tax, plus whatever for self-employment tax. (Understand: that number is a *very* rough estimate - I was using the 2008 tax tables, and I didn't work out your self-employment tax, so I didn't deduct half of it from your AGI... yes, you get to do that. Plus, if you had income from any other sources in 2009, that'll change the numbers too.)
Before tax time, you need to make sure you have a good record of all your income and expenses. (Any and all expenses, even if you don't think they count. Very few businesses have no expenses, and not claiming any is a red flag to the IRS. Besides, business expenses are deducted from income before figuring any taxes, which includes self-employment tax, so the more you can claim the less you have to pay in taxes.) If you have all this together and ready at tax time - receipts, invoices, everything - your tax professional will bless you.
Best of luck! :-)
Edit: Yes, you can take standard deduction even when using a Schedule C - I've done it in the past with self-employment income. And while I have done my own Schedule C's and SE's (and not found them difficult), if you're nervous about them, then paying a tax professional is the best choice for you.
Source(s)by becky - 4 years ago
You can take the standard deduction if you are self-employed. However, the standard deduction only affects the regular federal income tax, not the additional self-employment tax.
There are two taxes to consider:
a. Self-employment tax. Multiply your "profit" by 0.9235 to find your earnings subject to this tax (you multiply by 0.9235 because 7.65% of profit is exempt from this tax). Multiply the product by the 15.3% tax rate. The result is the self-employment tax. In your case, it will be approximately $1500.
b. Federal income tax. Add your self-employment income plus all your other taxable income. Subtract the standard deduction, the exemptions for yourself and your dependents, and 1/2 of the self-employment tax. If you have no taxable income other than the original $11,000, then the remaining amount will be only a few thousand dollars, and the tax will be 10% of that.
Add the two taxes together. It your case, it will be between $1500 and $2000 if you are single or married filing separately, possibly less if you are married and file jointly. Now subtract any credits for which you qualify, such as the earned income credit. The remainder is the amount that you must pay.