Every taxpayer who files a 1099-MISC, like freelancers and contractors, needs to know how much to set aside for taxes and when to pay their tax bill.
Filing your taxes when you’re a self-employed worker can be challenging, especially if you’re not familiar with the types of forms you’ll need to receive and file at the end of each tax year. If you’ve performed any type of service or supplied any type of goods to an independent contractor, you’ll likely receive Copy B of Form 1099-MISC
This is a crucial receipt of payments received. If you’ve ever wondered, “How much should I set aside for taxes ?”, then keep reading. This brief guide will help you understand how much money to set aside for taxes if self-employed, and how to utilize the 1099-MISC.
Who Should File Form 1099?
IRS form 1099-MISC allows an individual to report payments made to independent contractors and freelancers. Many independently-employed individuals don’t receive a W-2 from an employer or pay taxes on their received income. Consequently, people who are self-employed often end up owing money to the IRS at the end of each tax year.
Form 1099’s primary purpose is to take the place of the more traditional W-2, allowing self-employed individuals to correctly and efficiently file and pay their taxes. If you’ve performed any paid services or provided any paid goods to an individual or company during the last tax year, you should receive a 1099 to confirm these payments.
Using the information from a received 1099 can help self-employed individuals determine their correct gross income, allowing them to complete their Form 1040
or 1040-SR and file their taxes.
How Much Money to Set Aside for Taxes
Determining how much money to set aside when you’re self-employed can be complicated. But if you remove potential deductions and concentrate solely on your gross income, it becomes far easier. To start, you can use any 1099s you’ve received and begin calculating what you owe on that miscellaneous income.
How Much Taxes Do I Pay on 1099 Income?
You’ll want to gather all of your 1099 forms before attempting to file your taxes. It’s a good idea to add the sums of these receipts, eventually coming to a gross total. This final number will help you find out how much in taxes you owe.
Once you have your gross income number, you can take a look at the current tax brackets to see where you fall. These brackets will determine what percentage of your income is owed back to the IRS in taxes.
When Do I Pay Taxes on 1099 Income?
Self-employment taxes are due quarterly, four times per calendar year. Calculating how much you should set aside for taxes helps you avoid fees from the IRS when the April tax deadline comes.
Understanding 1099 Tax Brackets
Do you know what tax bracket applies to you? If not, you’re going to struggle to pay the right amount in taxes each year. Each year, the IRS updates their tax brackets. The 2020 tax rates
are currently available, and they do differ from the previous year’s percentages.
To help you understand how tax brackets work, let’s use the 2019 rates and percentages. The table below should help you visualize how each annual income necessitates a different tax amount.
|Single Individuals Annual Gross Income
|Percentage of Income Owed to IRS
|$400 - $9,700
|$9,701 - $39,475
|$39,476 - $84,200
|$84,201 - $160,725
|$160,726 - $204,100
It’s important to note that all of the values shown above apply to single individuals, not married couples. To determine how much you owe in taxes as a married individual, you’ll need to refer to the correct bracket.
How Much Should I Set Aside for Taxes 1099 Married
Figuring out how much to set aside for taxes when you’re married is very similar to figuring out how much you owe when you’re single. The major difference is the bracket amounts, as they must account for two potential incomes rather than one. The chart below reflects the 2019 tax brackets for married couples.
|Married Couples Filing Jointly Annual Gross Income
|Percentage of Income Owed to IRS
|$400 - $19,400
|$19,401 - $78,950
|$78,951 - $168,400
|$168,401 - $321,450
|$321,451 - $408,200
1099 Taxes Calculators
If you’re not comfortable figuring percentages without a calculator, you’ll be glad to know that there are tons of tax calculators available online. You can use the current year’s tax bracket and your gross income total to quickly and easily figure out your taxes owed.
Of course, consulting a tax expert is always a smart step. With professional advice, you can make sure you’re paying the right amount at the right time.
1099 Paycheck Calculator
If you’re struggling to come up with an estimated gross annual income amount, you can use a handy paycheck calculator. When you’re ready, you can also plug-in any deductions you need to make and the tax percentage that applies to your bracket.
1099 tax calculators with deductions are exceptionally popular. They offer a better, more accurate look at what you’ll owe in taxes each year. A 1099 tax calculator 2020 can help you ensure that you’re using only the most current information and calculations.
Creating a Savings Plan
You don’t have to wait until the end of the year to pay your taxes. ATAX is here to help with filing personal taxes, bookkeeping, payroll, business taxes, & incorporations. We can assist you in creating the perfect savings plan for your income.
Rather than spending hundreds or thousands of dollars on tax payments in one go, you can pay quarterly taxes to lessen your end-of-the-year burden. If you’re struggling to file your taxes, don’t fret. You can visit or contact your local ATAX office for friendly guidance, advice, and assistance in getting your taxes filed.