As a self-employed/independent contractor, you are responsible for paying both the employer and employee portion of taxes. If you were a W2 employee, your employer would pay half of your Social Security (12.4%) and half of your Medicare (2.9%). But as an independent contractor, you are responsible to pay the full 15.3%.

Next you have your Federal Income Tax. This is based on your taxable income minus deductions and expenses. The exact amount of your tax will depend on your total income, filing status, and deductions and credits.

As a general rule of thumb, you should set aside 25% – 30% of your net income to cover both federal income tax and self employment tax.

Finally you have your state and local taxes. Some states have no income tax (i.e. Texas and Florida) while others (i.e. California) have high rates. If you have state and local taxes, add another 5% – 10%.

As an independent contractor, you are required to pay Estimated Taxes quarterly if you expect to owe at least $1,000 in taxes for the year. The due dates for your Estimated Taxes are:

April 15th
June 15th
September 15th
January 15th

Business Deductions

This is where you can really lower your taxes by claiming all of your ordinary and necessary business expenses such as:

Office Supplies
Home Office (if applicaple)
Software, tools, subscriptions
Health Insurance (if self paid)
Retirement Contributions
Mileage or vehicle expenses

If you need help in estimating your taxes, claiming deductions, or any other questions concerning taxes for independent contractors, feel free to call our office and we will guide you to be compliant and pay all of your taxes.