I have a regular, full-time salaried position, but just started a business as an independent contractor (1099). I am about to receive my first commission earning and realize that I will need to file taxes. How much can I expect to pay in taxes (percentage)? Is it based on how much I make a year or is there a general rule of thumb? I am trying to calculate how much to set aside for quarterly tax payments. Thanks!

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Originally Posted by MBFMel

I have a regular, full-time salaried position, but just started a business as an independent contractor (1099). I am about to receive my first commission earning and realize that I will need to file taxes. How much can I expect to pay in taxes (percentage)? Is it based on how much I make a year or is there a general rule of thumb? I am trying to calculate how much to set aside for quarterly tax payments. Thanks!

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Here is how I do it -

First, I estimate how much I'm going to earn that quarter. Realize it is difficult to do when you first start. Then I figure out the FICA on that amount.

I am able to go back to the previous year, estimate whether I'll work more or less, go from there.

Then I add my proposed 1099 income to my possible W-2 income, take a look at the tax tables (in general), figure out my taxes, deduct my W-2 tax withholding and send the difference.

Some years I've estimated high, some years low. For 2008 my accountant just said, "Here, mail this in every quarter," based on 2007 income.

Form 1099-Misc income is reported on schedule C or C-EZ (Form 1040).
Read: Your U.S. Tax Return: Tax Filing by Self Employed Sole Proprietor or Independent Contractor

Put aside about one-third of every check to be safe so you HAVE the money when it comes to file in 2009.

Starting on 15 April 2009, you will have to pay quarterly estimated taxes using Form 1040-ES.