I was thinking about teaching and getting paid as a contract worker (receive 1099 instead of W2) and what that entails. I feel like there are so many jobs in our society where people are essentially working for themselves or considered a contract worker. I thought I would share some things to keep in mind as a contract worker when saving for taxes and making sure you are setting yourself up for success in that area.
Below are my top three things to keep in mind. I would love to know anything you do that helps!
1.Create A Tracking System
Having some type of system is crucial for keeping track or your payments and the amount set aside for taxes with each one. This can be created based off your pay structure or contract period. For example, with teaching I have contracts that are 6 months long. I set up my document to be in a 6 month period or contract period to keep it organized and to make the most sense for me! I use excel but there are many ways to keep things organized!
2. Create a Set Tax Percentage
Decide what percentage you are comfortable with setting aside each paycheck for taxes. 15% is the minimum with Social Security and Medicare, however most do around 30% to account for other taxes that will need to be taken out. This will all depend on your tax bracket at the end of the year! You also have earn $400 or more for the year to file as an independent contractor.
3.Make Quarterly Payments
Create an account with EFTPS (electronic federal tax payment system) to pay your quarterly taxes. This will all go towards your end of year tax return and eliminate one large payment at the end of the year. You can find the dates online and notate when they are due in your tracking system.
The main thing is to of course stay consistent with taking your taxes out and keeping yourself accountable so you aren’t in a bind at the end of the year!