Hi, I got laid off in January. In March, I got a temporary job working as a contractor for 3 months. I will be making around $10k during this period. Can I invest all in Self Employed 401k so I don't have to pay any taxes? If I invest all the money in Self Employed 401k then Do I have to pay SS and Medicare tax? If yes, then How do I pay and how much do I pay and how often do I pay? Can I invest money in Self Employed 401k in the January 2010 or I have to invest before that?

I appreciate your insight and thanks for helping.

I assume you are a U.S. citizen.

If so, you MUST pay self-employment taxes on the $10,000 you earned. Investing in any type of tax-deferred pension will NOT affect the assessment of the 15.3% self-employment tax.

If the $10K is you only income, the combination of your personal exemption ($3,600) and the single standard deduction ($5,600) will mostly offset the $10K in income, so investing in a tax-deferred pension really does not make sense tax-wise.

Hi, I got laid off in January. In March, I got a temporary job working as a contractor for 3 months. I will be making around $10k during this period. Can I invest all in Self Employed 401k so I don't have to pay any taxes? If I invest all the money in Self Employed 401k then Do I have to pay SS and Medicare tax? If yes, then How do I pay and how much do I pay and how often do I pay? Can I invest money in Self Employed 401k in the January 2010 or I have to invest before that?

I appreciate your insight and thanks for helping.
1099-misc income: You are self employed or independent contractor. You must file your tax return if yourself employed income is $400 or more. You will report your income and expenses on schedule C or C-EZ (Form 1040). Then you put net income (or loss) on line 12 of Form 1040. This income is subject to SE tax at 15.3% (this is shown on line 57 of Form 1040). Half of SE tax is deductible on line 27 of Form 1040. Read: Your U.S. Tax Return: Tax Filing by Self Employed Sole Proprietor or Independent Contractor (http://taxipay.blogspot.com/2008/04/tax-filing-by-self-employed-sole.html)