I'm hoping someone can explain this to me. I am trying to figure out how bad off I might be tax wise this year and I don't understand a few things about taxes as a self employed individual and the more I try to read about it the more confused I get. So I'll use some round numbers and maybe somebody (hopefully) can explain how this works and my idiot brain can understand it.
Let's say I made a gross income of $60,000 for the year 2005 and had business related expenses of $10,000. So my net income would be $50,000. Now let's say I paid $8,000 in estimated taxes for the year. What do I owe? I know there is a self employment tax that is deductible and there is a formula to get what the self employment tax is. That's about where I get lost. Do I then deduct the self employment tax from the net and get a new net income and then calculate taxes on that? I am single with no kids/dependants. I have a major headache right now trying to figure this out. I have a CPA to do my taxes but I'm just trying to get an idea how bad off I'm going to be. These figures in the post aren't true numbers but just to give me an idea of how to calculate it. They are close though so I should be in the 25% tax bracket.



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