1099 and W2 income

[LMDROB]

Hi

I am trying to figure out what my potential income would be from 1099 work.  Its my first time venturing out into 1099 work.  My W2 income will have me hitting the Social security limit of 118.5k?

As best I can figure, I am setting up at this:

1099 Income = 100,000
Business deductions = 10,000
SEP IRA (20% or 20,000)

Self employment tax (6.2% employer SS, 2.9% for medicare, omit the employee Social Sec since it'll be withdrawn from W2 employer).  = 7,480.35
Taxable income is 100,000 - Deduction (10,000) - SEP IRA (20,000) - SET (7480.35) = $66259.83

Federal income tax = Taxable income * 0.35 = $23,190.94
State income tax = taxable income * 0.0575 = 3809.94
total tax liability is = 27000.88

so my take home after taxes and SEP is 39, 258.95, yearly?

I'm not sure what deductions to use, if any.   Example was based on a single person with only 1099 income.

Thanks

Very new to this.  Will be looking for a new cpa once we move in the fall.  But I'd like to understand things more myself.

[Miss Piggy]

I'm sorry...I have no idea what you're trying to ask here. Can you please rephrase your question(s)?

[LMDROB]

Hi

I'm trying to figure out what my taxes would be for 1099 income.  I will also have W2 income as well.   

I gave an example calculation I had done, but I am not sure if its right or not.

Not sure how its going to differ if I elected to do it as an LLC S-corp either.

[johnny847]

Well we're missing your W2 income estimates so we can't really verify your calculations.

For what it's worth your federal income tax looks like it was calculated incorrectly. You don't apply a flat 35% tax rate to your taxable income, no matter what tax bracket you're in.

[LMDROB]

Hi

Thanks.  My W2 income is going to be 300k a year.

How would I look at the  federal income tax rate then?

edit: 

so I should be looking at taxes this way?

10% for the first 18550 I earn, 15% for the next 50k or something up to $73,500, and so on until I reach an estimated income of 400k (as an example).

[MDM]

I am trying to figure out what my potential income would be from 1099 work.  Its my first time venturing out into 1099 work.  My W2 income will have me hitting the Social security limit of 118.5k?

Easiest thing for you may be to start with your 2015 return, then estimate the 2016 numbers and recalculate.  Does that appear doable?

[LMDROB]

Thanks.  Going to use last years tax rate plus the state income tax (leaving a income tax free state :(  )

[MDM]

Thanks.  Going to use last years tax rate plus the state income tax (leaving a income tax free state :(  )

That will probably be better than nothing, but if your taxable income differs significantly then your overall tax rate will also differ.

You'll need to determine your 2106 taxable income, then use formulas such as found in https://en.wikipedia.org/wiki/Rate_schedule_(federal_income_tax) or page 89 of https://www.irs.gov/pub/irs-pdf/i1040gi.pdf to figure the federal taxes (and of course the self-employment tax), then apply whatever your new state does for taxes.

[Choices]

If you make over $118,500 at your W2 job, you don't have to pay any of this from your 1099 job. You had listed "6.2% employer SS" but this is not correct because your W2 employer will have already contributed the annual max. Yay!

[johnny847]

Because of your income level, if you claim a lot of deductions, you may end up paying the Alternative Minimum Tax (AMT) (Technically nobody pays the AMT - you really pay some term I forget that is the difference between the tax under the AMT system and the regular system - but I digress).

https://en.wikipedia.org/wiki/Alternative_minimum_tax

[MDM]

Because of your income level, if you claim a lot of deductions, you may end up paying the Alternative Minimum Tax (AMT) (Technically nobody pays the AMT - you really pay some term I forget that is the difference between the tax under the AMT system and the regular system - but I digress).

https://en.wikipedia.org/wiki/Alternative_minimum_tax

Good point.

Spending ~$30 for TaxAct 2015 or similar, then entering 2016 estimates, might be best.  It appears the OP has used CPAs for many years and has lost touch with the mechanics of Form 1040, Schedule SE, etc.

[LMDROB]

Thanks.  And yes I haven't done my taxes in a few years now.  Was never something I enjoyed or was good at.  So for $200, I felt it was well worth the cost to have someone else do them for me.  Esp if it saved me extra on my my taxes.