to no avail, rather.

As for getting hit twice as hard- you still pay the same amount of 'federal tax'

The FICA/Medicaid tax, however, is normally split with your employer, so you end up paying the full 15.3% instead of 7.65%. This is in addition to the federal income tax.

Thanks! 15.3% is scary.

Anyone in CA know if the state tax percentages differ for contractors?

i was going to correct you and say it's 1066, dude. but then i realized that you were writing about a different kind of battle.

I also pay estimated taxes. I live in North Carolina and make about 29k per year and at that rate, my taxes are roughly 26% of the total including 15.3 self emploment tax.

This link
http://www.irs.gov/formspubs/article/0,,id=133517,00.html
is for 2005 tax tables for federal taxes which should give you a good idea of what that portion will be. Remember that your federal taxes will be from your gross income minus the 15.3%. The tax percentages aren't a flat percentage for federal and I imagine state. Instead they're teired with language like this "$4,090.00 plus 25% of the amount over 29,700
". I can't imagine that CA state tax is a flat 9% for everyone so don't just expect it is without looking for a similar chart to the one I linked above. Good luck.

Thanks! Very helpful!!

As an Oregon resident I was setting aside about 30% in order to cover federal and state taxes just to be safe. But after writing off business-related expenses, I probably ended up paying more like 25%.

Of course, like the comments above point out, it depends a lot on which tax bracket you're in.

Yup, I paid about 28% of my earnings last year. It hurts, for sure.

Just make sure you pay as you go, or have at least 30% in the bank.

geeezzz you Americans got it good. In Europe I pay ...or better said, they take each month 42% of income. Not to mention the 19% sales tax (not 6% like in the us), property tax, environmental tax, car weight tax, annual registration car tax, dog tax (no joke), property tax, recycling tax if you buy a tv etc. Even if you rent a house you have to pay an annual fee to the local government. This answers the questions why we live in tiny houses, drive small cars if we can afford it and in general own so little.

Yes, but Harold you guys get free healthcare and have good public transit.

Here in the US the independent contractors get screwed *unless they have a good accountant.

yeah, it's not a black and white comparison. If I factored in all the other taxes, I'd easily be up past 42%.

Any Canadians want to add to the comparison? Just curious.

I wanted to retort to someone who said "Just make sure you pay as you go, or have at least 30% in the bank". Two things.

First, this seems to imply that it's okay to wait until April to make a tax payment. It's not okay. If you don't make quarterly payments, you'll get penalized. More importantly, I'm told you get something like a 'flag' by your name in the IRS' computer system that basically means they watch you more carefully in the future. You really DON'T want this. There are a few exceptions to the quarterly requirement such as having been a student for a portion of the calendar year.

Second, as those of you who listen to NPR should know from commentator Michel Singletary, it is NEVER a good idea to overpay taxes and get a refund. If you owe any money to anyone, your debt is accruing interest throughout the year while you overpay uncle sam. If you really owe no money and your fiscal discipline leaves much to be desired, it's fine to use overpayment as a savings account. However, as everyone on this board is an architect or future architect, no doubt 99% of you have debt.

For the rest, those for whom being rich meant a free ride through school, all I have to say to you is that I personally wish your taxes were much higher so the rest of us wouldn't have to worry about owing money.

For those who are interested, here's a link to a page with statistics on total tax revenue as a percentage of GDP for all OECD countries. We clock in at a meager 25.4%. Those with honors of highest tax rate are Sweden (50.8%) and Denmark (49%).

Oh, and Canada's taxes are 33.9% of GDP.... for whoever asked.

Free healthcare only in Denmark and Switserland. I pay about 100 euros a month.

GET TURBO TAX...it is a great program.

since you are contract you can deduct quite a bit...and the great thing about turbo tax is that it will go through step but step with all of your situation NO MATTER HOW COMPLEX.

you can set up for quarterly amounts.

(and no i don't work for them!!)

Regarding healthcare, although some europeans may see a deduction for healthcare, the biggest benefit of national healthcare is cost as a percentage of GDP. The US currently spends ,I think, 15.3% on healthcare and 80 million are uninsured. That number is expected to increase to 18.7% in 10 years. In all countries with national healthcare, the average as a percentage of GDP is about 10%. Through price controls, centralized administration, and other measures, these countries are able to hold down the price that we american in our 'free' market see spiraling upwards out of control.

The 100 euros someone is having deducted is probably the limit of what they'll ever pay. In the US, our monthly payments often aren't the only money we pay for medical care. With some private US plans you pay a percentage of surgery costs, diagnostics and the like. Of US-$4500 dollars for a simple knee scope surgery this year, I paid $1500 in addition to my monthly payments. So in many european countries, richer citizens, employers, and private companies in general are subsidizing national health care heavily. Not a bad deal at all.....

I used Turbo Tax for two years (02 and 03), but then last year it would not let me uncheck the option of being a property owner. I own no property, yet it wouldn't let me change it. So I gave up with Turbo Tax (God forbid I call someone. Internet!) and switched to H&R Block's online service. I ended up saving about $400 over Turbo Tax! Weird, but I don't question it.

Also, unless your deductions are more than $7,000, don't bother keeping up with receipts, your standard deductions will be greater than your itemized deductions. It will save you a lot of time and grief. Turbotax is indeed a great program. If you don't know your esitimated tax rate, you can estimate your income and use Turbotax to figure a percentage.

if i were you, i would not use turbo tax or h&r block. find a good accountant. they will be well worth the money.

and you can deduct the cost of the TurboTax program too....

I second getting a good accountant - ours is very respectable and somewhat conservative, and doesn't seem too concerned if we don't make our quarterly payments on time (I take care of it to save money). I think last year we were penalized a total of $8 - it's a very low percentage of what you owe... of course by late I mean a few weeks, not months.
I'm also one to try and send what I think is extra in advance - I understand the idea of not overpaying and using the money to make interest, invest, etc., however I've been in the position of owing quite a bit of money at the end of the year and it sucks - I'd much rather overpay a bit and get money back - it's a psychological payout as well.
Just to chime in on the taxes owed - we're in CA and have quite a bit of expenses to write off - last year we were in the 10% federal tax bracket (made very little money), & ended up paying a total of 20% of our net income in taxes. So to be safe, I'd save &/or send quarterly 25-30%.
Also, when shopping for an accountant, compare fees - they guy we had doing our taxes when we were working as consultants with 1099s only charged $60 total to e-file for both of us, and it worked out well. Now we pay a lot more because of complicated returns, but there does seem to be a large range in the fees people charge.

yeah, I agree with the good accountant. For the $300 or so, you'll easily find something you would have missed on your own.

Yes, I was penalized, but it was only a few hundred bucks. For the security of having the money in the bank if I needed it, it was easily worth it.

the first time i used an accountant, he wanted to see my tax forms from the year before so that he could review them. he found an xtra $1200 for me that h&r block missed. that was reason enough for me never to use h&r block or turbo tax again.

First time I used an accountant we went back and refiled for the previous 2 years for a refund of about $3,000. TurboTax is fine if you're just doing some freelance work on the side, but if you are self-employed I really recommend finding a tax consultant.

as you said rpsnino, if you are just doing some freelance you're probably okay without an accountant, but if you are doing more than some, are self-employed, or have serious assets [house, etc], i would get an accountant.