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Thread: Income Tax 101 ?

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    Default Income Tax 101 ?

    As a brand new dancer, how do I go about doing the tax thing the proper way? I know, I know..ask an accountant. I will when I can afford to see one :-) But for now, how do I determine how much I should set aside to pay taxes? And how do I even file??? I've never worked for myself, so I have no idea how to even start handling income tax.....

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    Default Re: Income Tax 101 ?

    put 35% away and be sure to send the IRS a check every quarter (and your state and local taxes too). You can use Turbotax to file.

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    Default Re: Income Tax 101 ?

    Abagail there are a lot of variables which affect how much you should set aside for paying estimated taxes. Some of the major ones are of course the total amount of money you are earning, if you live on your own versus still living with your parents, whether or not you live in a state which has its own state income tax, whether you are single or married or have any children etc.

    I agree that one of the tax preparation programs like Turbo Tax Premier ... which includes capabilities for doing Schedule C self-employment income ... is an affordable way to accurately calculate the amount you should be paying to the IRS in estimated tax payments every 3 months as well as accurately calculating your actual tax return.

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    Default Re: Income Tax 101 ?

    Or there is the FREE Turbo Tax you will find at www.irs.gov that ONE DAY Melonie will actually try and find out it's the same program as the high dollar premier (Sched C and all) without the useless advice.

    In my opinion 35% is WAY to high for quarterly estimates assuming an normal (non New York or LA) income in the $60K-$80K range. Closer to 20% after deductions are factored in will usually suffice.
    14 years working in Strip Clubs. "What a long strange trip it's been"

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    Default Re: Income Tax 101 ?

    ^ To add to that...if you are an IC, you would do all of the above. If you are an employee (meaning you claim your tips and are paid on a steady basis in paychecks) then you would do your taxes once per year like usual.

    Either way, you need to make sure that you keep a daily accurate ledger with all of your earnings, tip outs, house fees, expenditures in relation to work (keep those receipts) and do it faithfully after each shift. It'll make your tax preparation much easier.

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    Default Re: Income Tax 101 ?

    Thanks ladies. I'm going to ask some questions when I file my taxes this year....but to throw more info out that way, I live alone (rent), no kids, no state income tax, and I'm currently seperated (will be divorcing in a few months).....Obviously have no idea how much I'll be making b/c I've only danced part time so far....I just want to start setting money aside right away so I'm not having to fork over TONS at the end of the year....

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    Default Re: Income Tax 101 ?

    I looked around the IRS website and I'm mad confused.....it keeps talking about estimating how much I'll make for the year and then basing my tax on that...how am I supposed to know how much I'll make this year when I haven't danced full time before??????

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    Default Re: Income Tax 101 ?

    you estimate because you know what you made that quarter, so you estimate what you will owe for that quarter at the end of the year. So, for instance, let's say you make $10,000 betwen Jan 1 2005 and Mar 30, 2005. Then you send the IRS $3000 by Apr 15th 2005 for that period (assuming 30% tax rate). You may end up owing more at the end of the year, which is fine. You may even get a refund. This is why it's an estimate.

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    Default Re: Income Tax 101 ?

    Quarterly estimated taxes can be computed one of two ways

    1) ANNUALIZED EARNINGS METHOD - Take your earnings to date at the end of each quarter, net of schedule C deductions and multiply by 4 for the first qurter, 2 for the second quarter, 4/3 for the third quarter, and 1 for the final quarter. Calculate your taxes based upon that annualized amount. Make sure you have paid 1/4 of the total in the first quarter, 1/2 (less first quarter payment) in the second, 3/4 ( less first and second quarter payments), 100% ( less the first three quarters paid) for the respective quarters.

    2) SAFE HARBOR METHOD - Take your prior year tax liabilty before withholding and estimated tax payments, use 110% of this amount if you earned in excess of $150 in 2003. Divide that amount by 4 for the first quarter, 2 for the second quarter, 4/3 for the third quarter, and 1 for the last quarter. Make sure that the total current and prior quarter withholdings and estimated payments are met for each quarter.

    You may not use the Safe Harbor Method if your prior year tax returns did not have a full 12 months of earnings. You do not want to use the first method unless you are excecting a significant decrease in earnings in the current year versus the prior year.

    Since you are getting divorce, you must include the any alimony payments you receive in the current year when computing your income for the first method. The self employed income is subject to FICA ( Social Security & Medicare), but the alimony is not.

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    Default Re: Income Tax 101 ?

    LOL...okay I'm so confused ;-) I'll try to talk to somebody when I file taxes this year and see if I can try to understand.......BTW, there'll be no alimony.....dunno if that matters......

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