I am about to begin working online as an independent contractor. I understand that I will recieve a 1099 MISC form at the end of the year. That's about all I understand. I live in Arkansas, and I was wondering....what percentage of what I make do I need to put up for taxes? And what if I would rather pay my taxes quarterly? Sorry, I just don't even know where to start. Thanks.

AtlantaTaxExpert

You will eventually have to make quarterly estimated tax payments, but NOT for 2007. The safe harbor of being a first-time Schedule C filer will save you for 2007.

Your self-employment tax is 15.3%, and it is likely that you will be in the 15% tax bracket. Add about 5% for Arkansas, so you should put aside at least 35% of each paycheck for taxes.

m3lissa

Ok. So far this doesn't look like such a good idea. Can you tell me what this would do to my and my husband's tax return? We usually get a nice return. Would we be able to file seperately to save our return, or should I just forget it?

AtlantaTaxExpert

I cannot advise you whether to forget it or not. We ALL pay taxes, some more than others. Do NOT let the potential tax payments cause you to NOT get into a venture that will earn you money.

As for filing jointly versus separately, that decision can only be made once all factors are considered. I usually have to prepare the returns BOTH ways to get a definitive answer.