Im now self employed, what do I invest my yearly tax savings into,b4 i have 2 pay out

[FreedomFighter]

This is the first time in my life that I am independantly contracted through my employer. My employer pays me (not under the table) and I have to save up for taxes. Im assuming 28-30% per pay check would suffice? My questions is this....for the next year, while saving up for my taxes what should I put my money into(somewhat risk free)? CD's? Also, cant the gov't tax me off of the profit I make from a short yearly investment? I know nothing about banking so be gentle w/ me

 

[HumorMe]

You have to file quarterly estimated income taxes. If you underpay those taxes for the year, they hit you with penalties and interests. Get you a CPA or an accountant. CPA will give you the best advice.

 

[MattTheSkywalker]

Hiring a CPA is some really sound advice.

Before you do: Are you incorporated? If your employer allows you to do that, go ahead and do so, ASAP.

 

[HumorMe]

Hiring a CPA is some really sound advice.

Before you do: Are you incorporated? If your employer allows you to do that, go ahead and do so, ASAP.

Damn, forgot about the incorporating thing! Good advice too!

 

[SV2]

dont be so quick to incorporate... If you can project your yearly earnings, its very easy to compute your tax liability using the tax tables.. even if you itemize your deductions.

yes interest income on CD's is taxable, but you will get a form for those from the issuing bank.. its smart to buy CDs, but make sure you time their maturity so you can pull the money out with out penalty when you have to cut your check to uncle sam.

Also, dont go hire a CPA just yet.. what kind of deductions do you claim??

Also, you can write off business expenses with out incorporating, the only reason to incorporate is to remove yourself from liability, but since you are a sole proprietor who is selling his time as a service, the only reason you have to incorporate is to protect from lawsuit... The corporate income tax structure is more aggessive as well, and you will take home less pay... something to think about

 

[FreedomFighter]

I sell timeshare at a resort and am doing VERY well. I get a commission check with every sale. No taxes are taken out. So where do I go from here....im ignorant oon this guys....i understand about early withdraw penalties before maturity(on cds), but the other stuff (incorporating) is throwing me off....unless you mean to incorporate myself as a business for tax advantages, but seeing that I am working for a developer...i dont think it is possible is it?

 

[rsnoble]

Being independently contracted could be illegal. Refer to the microsoft case. If the company is basically telling you everything to do and how to do it, it is illegal. However you'd have to be careful about what you say and go about it. I am assuming there only doing this to avoid health insurance, etc. I don't know any company that would do this in order to make things better off for you. Do a search on idependent contracting and you can get all the legal bs im talking about. Employers use this and abuse this, and recently microsoft got their ass kicked for millions in court.

 

[HumorMe]

This is what will happen. You will get a 1099 form from the developer at the end of the year. He also sends a copy to the IRS. The IRS will take that form and compare it to your tax return.

If you haven't made quarterly estimated taxes on that income, then you will get a nice letter from them demanding payment of taxes along with penalties and interests. Sometimes, the penalties and interests are more than what you are liable for.

Even if you have made those estimated taxes but paid less than the 90% alllowable rate, you will still will be hit with penalties and interests. The 90% rate is you need to pay at least 90% of your estimated taxes yearly to avoid the penalties and interests.

The tax laws are so confusing that it takes a professional to understand them. That is why i suggested a CPA. He will keep you out of jail and he knows what the IRS will red flag plus he goes to bat for you if you get audited.

 

[FreedomFighter]

Being independently contracted could be illegal. Refer to the microsoft case. If the company is basically telling you everything to do and how to do it, it is illegal. However you'd have to be careful about what you say and go about it. I am assuming there only doing this to avoid health insurance, etc. I don't know any company that would do this in order to make things better off for you. Do a search on idependent contracting and you can get all the legal bs im talking about. Employers use this and abuse this, and recently microsoft got their ass kicked for millions in court.

I have my Real Estate license. Here in FL, you have to have one to sell time share, so theerfore, you would need to be "self-employed" but work under a developer on a commission base pay.

 

[DcupSheepNipples]

This is the first time in my life that I am independantly contracted through my employer. My employer pays me (not under the table) and I have to save up for taxes. Im assuming 28-30% per pay check would suffice? My questions is this....for the next year, while saving up for my taxes what should I put my money into(somewhat risk free)? CD's? Also, cant the gov't tax me off of the profit I make from a short yearly investment? I know nothing about banking so be gentle w/ me

Off Shore! Enough Said!