Today TaxMama hears from Megan in KY who tells us, “I have recently been asked to do some marketing communications consulting work for my previous company. I went on maternity leave last February, then resigned. In this freelance position, I have a cap of 25 hours per week that I may work. This is the only type of consulting that I do (I have never done anything like this before) and I don’t intend to do it for anyone else. Basically, I am helping them out until they can hire a full time employee. Besides doing this, I am a stay at home mom. My question is a) do I have to pay estimated taxes quarterly and b) how do I determine how much to pay since the amount of work can vary greatly. Some weeks I may work 25 hours and some 1 hour. Help!”
It sounds like a good opportunity to keep your professional skills active. And even when they do hire someone full-time, no doubt, there will be times they can use you – if you encourage it. Besides, who’s going to train the new employee? Probably you!
What is the best way to handle this for estimated tax purposes?
Do your bookkeeping so you know what your profits are each month. If you do that, then at the end of each tax quarter (September, December, March, June), you can simply run a report to get the total profits for each quarter.
Knowing your profits – send IRS a check with the Form 1040-ES
for the following amount – add these two items:
a) 15.3% to cover Self-Employment taxes
b) 15% -25% (depending on your family’s tax bracket) to cover IRS taxes.
Essentially – 30% would probably be fine.
Also remember to send 5.8%-6% to Kentucky.
Remember to track any expenses you have – like telephone, office in home, supplies, mileage, etc.
And have a good time with it!
And remember, you’ll find answers to questions about estimated taxes and all kinds of tax issues, free. Where? Where else? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips. Please click on the subscribe link and join us.]
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- IRS Form 1040- ES :: Quarterly Estimated Tax Vouchers – IRS
- KY Form 740- ES :: Quarterly Estimated Tax Vouchers – KY