Taking taxes out of my paycheck....?

Question

Hi, what is a good program to keep track of my state and federal taxes that are going to be coming out of my check? I'm a commission based hairstylist, and the owner doesn't take any taxes out on me, so.....

Is a computer program better, or do I need a CPA?

Answer 1

You don't need a CPA.  However, you will need to send estimated payments to the IRS.  Plan on sending 15% of your gross earnings in for Self-Employment Tax.  

If you expect your total pay to be "profit", you can use IRS Publication 15 to determine what you should send to the IRS for income taxes each time you get paid.

If you have access to a spreadsheet program you can set up the formula yourself.  Some people like the website paycheckcity.com.  Just remember that you will need to make estimated payments to your state as well.

Answer 2

The owner is required to give you a year end statement that indicates the total amount of income you earned and the total amount of taxes (totals by type of tax). Even if you are  commission based the owner is required BY LAW (the IRS is very specific about this) to pay 1/2 of your Social Security tax and withhold the proper amounts for state and federal taxes. She can't declare you an independent contractor (non employee) even if you sign an agreement with her stating you are an independent contractor (the IRS routinely voids such contracts) unless you are truly independent (she can't set you work hours, can't set  the rates you charge your customers, etc.).

If you are really an independent contractor, then nothing will be taken out of your check. You'll just need to keep track of the total amount in a paper tablet or a computer file. Remember, your need to send the IRS estimated tax payments quarterly.