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Your friendly tax expert

In summary, the conversation advises setting aside 20-30% of commission for taxes, consulting with a tax professional, and keeping track of expenses and deductions. It also congratulates the person on their determination to make a profit and offers best wishes for their business success.
NooraK
Gold Member
5,871
I plan to make a profit on my business this year. Yes, I really do. I'm being very diligent about what I spend, not offering too many freebies and trying to boost my show schedule.

This of course means that I anticipate actually having to pay taxes on a portion of what I make. I want to set aside a percentage of my commission each month so that I'll be prepared.

But how much should it be? 15%? 20%? 30%?
 
If it were me, I'd probably do the 20% range. You'll likely have extra- if it's anything like when we do our taxes....but we almost always get a big refund. Factor in your deductions from the biz.... And if you have extra- then you already have NC money set aside. You can adjust the amount the 2nd year if you saved too much.That's how I'd probably do it- if I were making enough to plan like that ;)
 
When I was self-employed in the past I was advised to set aside 30% and that would cover everything and then some (easier said than done when you live paycheck to paycheck). That's my two cents anyway!
 
30% is what I would need to do here in Michigan.I think it breaks down to roughly these percentages: 5% MI state, 10% Federal, 15% Social Security. Again, those are just rough percents from what I can remember.
 


Congratulations on your determination to make a profit this year! It takes a lot of hard work and discipline to run a successful business. I completely understand your concern about setting aside a portion of your commission for taxes. It's always better to be prepared than caught off guard.In my experience, it's always a good idea to consult with a tax professional to determine the appropriate percentage to set aside for taxes. They will be able to take into account your specific business expenses and income to give you a more accurate estimate. However, as a general rule of thumb, setting aside 20-30% of your commission is a safe bet.Additionally, I would also recommend keeping track of all your business expenses and deductions throughout the year. This will not only help you accurately calculate your taxes, but it can also potentially lower your tax liability.Best of luck to you in your business endeavors! Keep up the hard work and I have no doubt that you will achieve your goal of making a profit this year.Sincerely,
 

1. How much should I save for taxes as a self-employed individual?

As a self-employed individual, it is recommended to save 25-30% of your income for taxes. This includes federal income tax, state income tax, and self-employment tax.

2. Do I need to save for taxes if I am an employee?

If you are an employee, your employer will withhold taxes from your paycheck and you do not need to save separately for taxes. However, if you have any additional income from side jobs or investments, you may need to save for those taxes.

3. How much should I save for taxes if I am in a higher tax bracket?

If you are in a higher tax bracket, you may need to save more than 25-30% of your income for taxes. It is best to consult with a tax professional to determine the appropriate amount based on your specific situation.

4. Is it better to overestimate or underestimate my tax savings?

It is generally recommended to overestimate your tax savings to ensure you have enough to cover any potential tax liabilities. This can also help you avoid penalties for underpayment of taxes.

5. Can I save for taxes in a separate account?

Yes, you can save for taxes in a separate savings account or even set up a separate bank account specifically for taxes. This can help you keep track of your tax savings and prevent you from accidentally using it for other expenses.

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