<p>I work for a SAT tutoring company. The contract says that since I am an independent contractor, I have to pay 33% tax, but on my own. This is my first job so I have no idea about the tax system. Do I fill out tax forms at the end of the year and send a check to the IRS? Also, is there any way to reduce the 33% tax? Seems awfully high for a 16 year old.</p>
<p>Also need to pay Social Secuirty a around 16%. If you expect to earn less than $4500 a year no need to pay in income tax withholding.</p>
<p>Go to <a href=“http://www.irs.gov%5B/url%5D”>www.irs.gov</a> and download Publication 505 – Tax Withholding and Estimated Tax.<br>
ICs don’t have federal or state taxes taken out with each paycheck. We pay them quarterly and they are estimated taxes because income can vary from month to month. And like barrons said – we have to also pay our own Social Security and Medicare taxes. People who have “regular jobs” have them withheld AND you employer pays half. I don’t know what your income will be – kids who work summers only usually pay no income taxes because they don’t earn that much, but still have to pay SS/Medicare.
I think as a single person you can earn about $5000 without paying federal tax. State taxes are different. But you do have to pay SS/Medicare.
I think the 33% comes from the approximate amount it works out if you earn enough money to REALLY need to pay taxes. So I don’t think you need to worry about that too much. How much of an entrepreneur are you?
Get the publication. It may seem like government tax babble, but it does tell you what you need to do.</p>
<p>the document is very long… i’ll read it later… meanwhile, can anyone be more specific in terms of what i need to do to stay out of jail?</p>
<p>I expect to earn much less than $4500. Probably $2000 to $3000 at best. the job has no stocks, benefits, whatsoever. i think i am medically covered under my dad’s name. i am 16, do i really need to pay for SS?</p>
<p>You do need to pay Social Security taxes :(. If you make a small enough amount for the full year, you could get away with doing everything at tax filing time. But, since you’re not sure how much you’ll make, what you need to do is file quarterly estimated tax forms and pay any estimated amount you owe based on the calculations you make when you file those forms. The forms are very short (about 1/4 of a page). </p>
<p>Don’t worry about the 33%; that’s just someone’s estimate of what a typical Independent Contractor might pay; someone who works full time at a fairly high pay rate.</p>
<p>It might be easiest for you (or your parents) to buy Turbotax. You can everything on your computer and the software walks you through it. That’s what we do and what we did for our S when he was an Independent Contractor for a summer job. He only made $1000 in that job, and it was only a summer job, so he didn’t file quarterly estimates.</p>
<p>I am an IC. If you are working as a tutor it is unlikely you need to file a quarterly estimated tax. At the end of the year your ‘employer’ will send you a 1099 form stating your earnings. Use that to file your income tax. You are unlikely to owe anything based on your income, other than Social Security. The rules regarding IC versus employee are rather complex, but if you work for a company that finds the clients for you and arranges your tutoring sessions it is quite possible that the must hire you as an employee. This is to your advantage, since the employer is required to pay 1/2 of your social security liability.</p>
<p>It’s highly unlikely that your combined federal and state tax will come even close to 33%. As others have noted, you are responsible for both sides ofthe FICA equation, which is 7.65% x 2= 15.30%. (All employees on payroll pay only 7.65%.) On the positive side, a 1099 contractor can file expenses on Schedule C. For example, if you drive to your clients’ houses for tutoring, you can deduct the roundtrip mileage. You can also deduct any materials used in your ‘business’, such as prep books, notepads, etc. as long as they are used exclusively in earning the income.</p>
<p>I was an Independent Contractor in 2005 and 2006 after I moved from my job out-of-state. </p>
<p>Personally, I’d pay the quarterly taxes just to be <em>SURE</em> that everything is happy in uncle sam’s eyes ;)</p>
<p>I have worked as an independent contractor for 3 years now. The first year I did not pay estimated taxes. I just paid what I owed in April, when I filed my taxes. Since I had to pay a fair amount (I made more than you will be making.) I had to begin paying estimated taxes at that point. However, there was no penalty for not paying them the first year. (My brother is a CPA who does taxes, so I checked with him first to be sure I would not get into trouble.)</p>
<p>So, I wouldn’t worry about it this year. Perhaps try to have a little set aside in case you have to pay something in April. But you won’t get into trouble if this is your first year being paid that way.</p>