Friday, July 27, 2007

You gotta do the research!

June, I am starting my own business and I will be the only full time employee. However I will be having people work for me periodically part time. I am not sure how much I should be withholding for federal and state income tax combined. I expect to earn around 60,000 a year with about 15,000 in expenses. How much tax should I be withholding for my taxes?

Thanks.
Merlin


Hello Merlin,
You say you are starting your own business but then you call yourself an employee. This doesn't jibe. Want to tell me more? You might want to read these columns from my website first --I am a Business and Taxes:Which ones and how much do I pay?

Best regards,
June Walker


June,
I own the business, but I also work the business. It is a tree removal company and I do all my own advertisement, use my own personal vehicle, and normally do the work all myself. Occasionally I have to bring someone out to help me and I normally pay them by the hour.

Merlin


Merlin, you didn't say what business entity you are so I assume you are a sole proprietor. I can't tell from your response whether or not you read the columns I suggested. Read them! You are a self-employed. You are not an employee. You are your business. You ask how much tax you should be withholding. Read Estimated Taxes and you will see that as a self-employed you don't withhold taxes the way an employee does.

Whether or not the people your hire by the hour are your employees or independent contractors depends on who controls what they do. Here's a post Employee vs. Self-employed that will help you decide which they are.

After you've read the columns and posts I've mentioned, do let me know if there is something in them you do not understand and we can go forward from there.

Best,
June

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