Virtual Assistant Forums | Work from Home

LucentVA · #1 (**permalink**) 06-13-2011

First, let me preface my post by stating that I understand that nobody can be held accountable for advice given about taxes. I am just looking for suggestions on how to help me figure out my ideal gross income so I know more precisely how to charge for my services.

I created a spreadsheet that was based upon the fields that I found in the freelance calculator here: http://freelanceswitch.com/rates/ That was very useful, however, it really only tells you what you should be making NET. If I just charged the rate I come up with using the calculator, I would be in trouble when I went to pay my income taxes.

I've tried finding information on the irs.gov web site and I found this:http://www.irs.gov/pub/irs-pdf/p15.pdf which might be helpful but for some reason I feel "stuck". I don't know if I should count my husband's income and try to work backwards (since we file jointly), but then his employer deducts and pays his income taxes. I know that there is no way to really know how much I'll be making, and for starters I will be working part-time at my VA business. But what I'm trying to do is get an idea of what things will look like when I've reached my first big goal of working FT as a VA.

Does anyone have any suggestions on the best formula or link to a chart or whatever, to help me get an estimate of what my GROSS income should look like? Maybe it's this migraine I have right now, but I'm just feeling kind of lost.

Tess · #2 (**permalink**) 06-15-2011

Hi Chela,
I finally hired a qualified tax accountant to help me with taxes each year and it's the best money I spend each season

But, I did and do try to understand as much as I can about our taxes because I think it's important to be aware... In any case, I would say this -

You will not be paying SE tax on your husband's income (I'm assuming he's employed by some other company not your own) so that isn't really something you need to take into account.

At the federal level you'll be paying your Social Security taxes at 10.4 percent and your Medicare tax at 2.9 percent - you may also have local ( state and city) business/self employment taxes to pay. With that in mind, you should add at least 15% (I always round up) to come up with what you want your gross income to look like. (If I understand your question correctly). Just remember that these tax payments are based on your actual income, so it will vary of course.

Most VAs I know set aside 30% of their income each month to handle taxes either quarterly or at the end of the year, whichever applies to them.

Tess · #3 (**permalink**) 06-15-2011

Also just wanted to share this great blog post about planning for tax payments, etc. (Note that SE taxes are lower in 2011 [% mentioned above is accurate for 2011], than when this post was written, but same approach applies)