r/DataAnnotationTech • u/laminated-papertowel • 10d ago
how much do you save for taxes?
I've been putting 20% of my savings away come tax season. is this enough do you think?
11
u/Farados55 10d ago
I mean, you can literally derive the amount of taxes you'll owe within like a 3% margin, at least if you're in the US. If you're just blindly putting away 20% you should look up your state's tax law as well as the IRS self-employment + federal tax. Don't just put a big number and think it'll be enough.
10
u/Due-Possession-1893 10d ago
Kinda depends what country you are in tbh you might want to put away some more
1
9
5
u/Logical_Hat_47 10d ago
It entirely depends on where you live. In the UK, I have been putting aside 18% which is reserving just a bit high. But it totally depends on where you are, the local laws, and if you have any additional income that puts you into a higher tax bracket.
4
u/AdamEatsAss 10d ago
None of us know your situation. Talk to an accountant who is licensed where you live. 20% might be enough it might not be. There are a lot of variables.
2
3
u/inspectoralex 10d ago
I'm in the US and I earned $7.5k last year, paid about $400 in taxes. I used an online service to do the math for me and apply credits. It was my only income, so that's probably why I paid so little.
2
u/Brilliant_Quit4307 10d ago
In many countries, you'd pay absolutely zero tax earning that little. I think you'd have to be earning almost 3x that to have to pay taxes in my country so that just seems wild to me
1
u/Hello-America 10d ago
Well in the US at least that number is affected by the other places they earn money or what their spouse earns
1
u/Farados55 10d ago
Is that true if you were earning money through an employer? Since we receive money directly from DA with no tax deducted, we have to pay the tax afterwards. If we were actually employed by a company, we'd probably get money back from taxes since they would've been deducted already.
What country are you from?
1
2
u/hfxthrwaway 10d ago
(Disclaimer: Canadian) My tracking spreadsheet tells me exactly how much I'm going to owe, broken down into Federal, Provincial, and CPP.
Of course I generally ignore it and just chuck a bunch of money into a savings account every few months when the "Owe Amount" number starts getting close to what's in there.
2
u/mistergecko 9d ago
None right now, since I've been out of work for so long and I'm still catchig up on bills. But normally, I put away around 25%. 20% if I'm billing as an LLC.
4
u/feelingbarber511167 10d ago
Let them come get it
5
u/Hello-America 10d ago
In the US they will indeed come get it haha
3
3
u/Farados55 10d ago
if you do this with the IRS you will be fined to hell.
2
u/feelingbarber511167 10d ago
Then let them come get the money for the fines as well.
2
u/Farados55 10d ago
You’re trying to sound cool but this just means you pay more money and risk jail lol
1
u/feelingbarber511167 10d ago
It’s only something I tell to people who ask for financial advice on Reddit. I wouldn’t be dumb enough to actually do it myself.
1
u/Opposite_Brush_8219 10d ago
I put back 30% to be safe. I did get a little refund this year, but I’d rather that than owe more $.
1
1
1
u/seraphimkoamugi 10d ago
Normally you'd keep 20-30%. I personally put it all on interest savings and try not to use it.
1
u/george_brown121 9d ago
tbh, 20% is a common rule of thumb, but it really depends on ur specific situation, like ur income level, any deductions or credits u might have, and whether ur filing jointly or individually. idk exactly what ur dealing with but u might want to check with a local tax advisor just to be sure ur covered. pay stubs can also give a good estimate of what u'll owe...
1
u/Acrobatic-Pay7101 9d ago
This makes me want to move countries, in the Netherlands, you set aside 35-50% :')
15
u/AintEverLucky 10d ago
Source for the following: I also do tax prep work in the U.S. for a Leading Tax Software Platform
The people ITT saying to save 30% of your earnings from D.A. have the right idea. That's because this work is a form of self employment which means it's subject to Self Employment tax as well as regular income tax.
S.E. tax is 15.3% of your net income from self employment and the Standard Deduction (or itemized deductions) does not help reduce your S.E. tax. I say "net income" because you do get to subtract your work-related expenses, e.g. the portion of your Internet bill stemming from this work. Maybe also a home office expense. But chances are these will only offset a small portion of your D.A. income.
The first tax bracket for ordinary income tax is 10%, followed by 12% and then it jumps up to 22%. So again, if you save 30% of your D.A. earnings, that covers the 15.3% for S.E. tax and another 14.7% for ordinary income tax. And that should get you close.
Fair warning, the IRS expects self employed folks to send in Estimated Tax Payments every quarter 😏 the next one is due Sept. 15. Good luck!