I'm going to be working a few months this year as a contract employee, making gross $5,500. I'll be receiving a 1099 for the 2016 tax year. I want to put away estimated tax, so there are no surprises come February 2017 (when we'll do our taxes). Can someone who more regularly works with 1099 taxes let me know if I'm missing anything?
Gross: $5,500
Federal Taxes (@ 25%): $1,375
IL Taxes (@ 5%): $275
Self Employment Taxes (@ 15.3%): $777.13
Total Withheld for Taxes: $2,427.13
Initially, this feels right to me--between 1/2 to 1/3 of the income. While on the face of it it looks like I'll also have to make a quarterly estimated tax payment (estimated tax liability of +$1,000), I expect our annual refund will cancel out most of the liability. When we get our refund this year I want to see how much we receive back; If it's more than $1,500 (which I expect it will be), I'll have a total tax liability of less than $1,000 for the 2016 year and won't need to send in quarterly payments.
I'll put away the money for taxes, and if it's a wash I'll use the money saved as I would the refund (down payment fund). If I still get more in a refund, great! If I do owe taxes for whatever reason, the money is there. I just want to make sure my tax estimates are on track, since the 1099 is new to me.
