Quote:
Originally Posted by GMAN
There is no magic formula to making a go of it in this or any other business. If you want a figure to work with then I would hold back about 30%. Your self employment tax will run around 15% by itself. I don't mean that you should hold back 45% for both taxes, but 30%for both. If you are a sole proprietorship you will pay self employment tax on your net earnings. This is in addition to any income tax. Self employment tax is social security tax. It would be best to find an accountant who has trucking experience. It can make a difference when you have someone who already knows about this business. Everyone's situation is somewhat different. My taxes will be different than yours. No two people will have the same tax situation. That is why it would be good to have a tax person from the beginning. He or she can help you get things set up right from the beginning. If you have a good tax person then your tax bite should not be too great. One thing to keep in mind is this is one industry the IRS is specifically targeting.
GMAN is on target. He is figuring an approximate holding percentage based on NET revenue (total revenue minus expenses and deductions). Another way to estimate hold back for taxes is approx 8-10% of your GROSS revenues. A lot of accountants, including mine and ATBS, feel that after all is worked out in the final analysis you will pay approximately 8-10% of what your total revenues are in taxes. So... based on this, everytime the settlement check comes in, just take a look at what your total revenues are (do not factor in expenses) and set aside 8-10% of that amount and you will probably have the right amount available for the tax man.
As has been stated, everyone's tax situation is different, but this method is probably the easiest to get a handle on, especially for the new business owner. Let a good tax professional work out the details.
Just keep in mind that just spending money to get a deduction is not always wise. Why would you want to spend $1 to get a $.20 tax savings? Watch those expenses and try to only spend money on items that will make or save you money. Do not always spend money just to get a projected tax savings or to massage your ego. Then you will do just fine.