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Thread: state taxes

  1. #1
    Featured Member Starfire's Avatar
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    Default state taxes

    Yes I am going to be one of those crazy strippers that pays taxes. I have the form for paying federal taxes quarterly all straightened out, but how do I pay my state taxes? Is there anything else I need to know about, I've heard something about a self employment tax? Will I have to pay that too?

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    Banned Melonie's Avatar
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    Default Re: state taxes

    Yes, every state/city that has a state/city income tax where you earned money last year will also expect you to pay quarterly estimated state income taxes - even if you don't actually live in that state/city. When I was doing a lot of 'road trips' there were times where I had to send in estimated tax payments to 4 different states plus New York State AND New York City ! Fortunately, you can claim a credit for income taxes paid to other states on your home state tax return.

    I include the fact that persons working in a state/city which has an income tax having to pay taxes to that state/city even though they may not live there because, with massive state and local budget deficits, some states and cities are making a major effort this year to track down non-residents who owe them lots of income taxes. For example the New York City tax people are tracking down people who live as far away as California, but who earned significant amounts of money while working within New York City at some point in 2004 !

    Since your profile doesn't list the state(s)/cities that you live/work in, you'll have to do some internet searching in regard to effective state/city tax rate percentages as well as for the state estimated tax forms (basically the equivalent of the federal form 1040ES). There's a very low detail summary of state tax rates and tax brackets at - which will at least let you know if your state has an income tax as well as a very rough guess at the applicable tax rate.

    In regard to self-employment tax for self-employed individuals, this tax is basically the equivalent of social security and medicare taxes which employees pay. Basically, for estimated tax purposes, it amounts to about a 7 1/2% flat tax (i.e. 7 1/2% of your total earnings regardless of how much total money you earned) on top of all other federal, state and city taxes (where these tax rates are progressive i.e. the tax % increases with higher total earnings), which you add to your quarterly federal estimated tax payment.

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    Last edited by Melonie; 03-30-2005 at 11:30 AM.

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    Default Re: state taxes

    Self employment tax rate is 15.3%

    the 7.65% is half of that which is the rate used for the adjustment on the first page (or simply take half of the total SE tax).

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    Banned Melonie's Avatar
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    Default Re: state taxes

    Quote Originally Posted by Crakeur
    Self employment tax rate is 15.3%

    the 7.65% is half of that which is the rate used for the adjustment on the first page (or simply take half of the total SE tax).
    Again technically true. However, 1/2 of the Self Employment tax reported on a non-incorporated dancer's Schedule C qualifies as a downward adjustment to gross income prior to calculating federal and state income tax due, which reduces these taxes. This is the reason that I mentioned that the 'rule of thumb' figure of tacking on an extra 7.5% for SE tax estimation purposes. When a tax return actually gets filed a year from now, that 7.5% figure may turn out to be a little high or too low depending on a large number of individual factors i.e. her total gross income for 2005, AMT, or a bunch of other factors.

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    Default Re: state taxes

    thanks for clarifying my post.
    however, if the schedule c has 50k in net self employment income, the se tax is based on that income. any reduction via the 1/2 se tax is only reducing the income tax portion of the taxes. if you are estimating your taxes you need to make sure you cover the SE tax (15.3% of net self employment income, not 7.65%) plus the income taxes (income, less adjustments, less deductions and exemptions).

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    Featured Member GnBeret's Avatar
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    Default Re: state taxes

    Quote Originally Posted by Starfire
    Is there anything else I need to know about...?
    Yes... itemize your deductions on your Federal return - State taxes paid are deductible, which at least helps a little bit as you can lower your taxable income for Federal purposes.
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