ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
OK, I'm not a 'young dreamer', but this conversation came up with DD today. She is a teacher, and is considering taking on some private tutoring jobs. The parents would pay by cash/check. She asked me about taxes.
A little probing and it looks like you should file a Schedule C (or C-EZ). I'm assuming this income would be taxed at your marginal rate (looks like she is at 15% marginal rate), plus SS withholding (employee/employer)? But then the SS would not be subject to Fed Taxes, so some iterative calcs here, I guess?
I plugged it into an on-line calculator, and it looks like $1,000 in 'side income' would be taxed at a 28% rate, plus we have 5% flat tax in IL for ~ 33% (a bit less I guess the full amount is not taxable). An added $1,000 in regular income would be taxed at her 15% marginal rate.
I'll just say that a young person in a low tax bracket was surprised that a little extra work would be taxed so heavily. She's definitely not a 1%-er!
No surprise that many do not report this income. Giving up over $300 for every $1,000 earned removes a significant incentive to do side work.
I'd always heard about the self-employed having to pay both sides of SS, but seeing the effects up close and personal was an eye-opener.
-ERD50
A little probing and it looks like you should file a Schedule C (or C-EZ). I'm assuming this income would be taxed at your marginal rate (looks like she is at 15% marginal rate), plus SS withholding (employee/employer)? But then the SS would not be subject to Fed Taxes, so some iterative calcs here, I guess?
I plugged it into an on-line calculator, and it looks like $1,000 in 'side income' would be taxed at a 28% rate, plus we have 5% flat tax in IL for ~ 33% (a bit less I guess the full amount is not taxable). An added $1,000 in regular income would be taxed at her 15% marginal rate.
I'll just say that a young person in a low tax bracket was surprised that a little extra work would be taxed so heavily. She's definitely not a 1%-er!
No surprise that many do not report this income. Giving up over $300 for every $1,000 earned removes a significant incentive to do side work.
I'd always heard about the self-employed having to pay both sides of SS, but seeing the effects up close and personal was an eye-opener.
-ERD50