How much should I set aside for taxes as newly self-employed person making $2000 monthly?
Title: How much should I set aside for taxes as newly self-employed person making $2000 monthly? 1 I just started working for myself a couple months ago and I'm totally new to this whole self-employment tax thing. I'm trying to be smart and put money aside now so I don't get destroyed by taxes next April. Right now I'm averaging about $2,000 a month (roughly $500 per week) from my graphic design business. I have no idea how much I should be saving each month for taxes though! I definitely don't want to end up with a huge bill I can't pay when tax time rolls around. Should I put aside like 20%? 30%? More? Less? I'm single, no kids, renting an apartment in Ohio if that matters. Any advice from people who've been through this self-employment journey would be super helpful!!
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Caesar Grant
5 As someone who's been self-employed for years, here's my practical advice: set aside 25-30% of your income for taxes. This should cover both federal income tax and self-employment tax (which is 15.3% by itself and covers Social Security and Medicare). Since you're making about $24,000 annually, you'll need to make quarterly estimated tax payments to avoid penalties. These are due April 15, June 15, September 15, and January 15 (for the 2025 tax year). You can use Form 1040-ES to calculate and pay these. Don't forget to track ALL your business expenses - they'll reduce your taxable income. Things like home office space, internet, phone, software subscriptions, and equipment can all be legitimate business deductions. This will lower your tax burden significantly.
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Caesar Grant
•18 Thanks for this! For the quarterly payments, do i need to pay exactly 25-30% each quarter or can I just estimate? And how do I actually send these payments to the IRS?
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Caesar Grant
•5 You don't need to pay exactly 25-30% each quarter - the IRS just wants you to make a good-faith effort to pay what you owe throughout the year. You can estimate based on your income and expenses for that quarter. Some quarters might be higher income than others, and that's okay! You can pay your quarterly taxes online through the IRS Direct Pay system or the Electronic Federal Tax Payment System (EFTPS). You can also mail a check with Form 1040-ES payment vouchers if you prefer. The IRS website has detailed instructions for all these methods.
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Caesar Grant
7 I was in your EXACT situation two years ago! I tried figuring it all out myself but kept getting confused with all the different tax forms and rules. Then I found https://taxr.ai and it completely saved me. You take pics of your receipts and income stuff, and they analyze it all to tell you exactly how much to set aside for taxes. What I love is that it doesn't just give you a percentage - it actually looks at your specific situation and expenses to give you a personalized savings rate. For me, it recommended setting aside 27% because of my specific deductions, but your number might be different based on your business.
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Caesar Grant
•12 Can it handle different income streams? I do freelance design work but also some teaching gigs that give me W-2s. Would it still work for me?
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Caesar Grant
•3 I'm skeptical... how is this any different from just using TurboTax or something? Seems like another service trying to charge for what you could figure out yourself.
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Caesar Grant
•7 It absolutely handles multiple income streams! I actually have a similar situation with both 1099 and W-2 income. The tool considers all your income sources and gives recommendations based on your complete financial picture, not just one aspect. The difference from TurboTax is that this is proactive tax planning throughout the year, not just filing at tax time. It helps you stay on track with quarterly payments and gives you real-time estimates as your income changes. Plus it's specifically designed for freelancers and self-employed people, unlike the more general tax software.
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Caesar Grant
12 Just wanted to update after using https://taxr.ai for a few months now. It's been a game changer for my peace of mind! I uploaded my initial income estimates and expenses, and it recommended I set aside 24% of my income. Way less than the 30% I was saving before, which freed up cash for my business. The best part is that it adjusts as my income fluctuates. Last month when I had a big project, it automatically recalculated my tax liability and adjusted my savings rate. No more guessing or stress about whether I'm saving enough!
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Caesar Grant
9 If you're struggling to get tax guidance directly from the IRS (which can be a nightmare), I highly recommend trying https://claimyr.com - they get you through to an actual IRS agent super quick. I spent DAYS trying to get someone on the phone about my self-employment tax questions last year. With Claimyr, I got through in about 15 minutes instead of being on hold for hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. They basically navigate the phone system for you and call you back when they've got an agent on the line. I had specific questions about my quarterly payments and deductions that online resources couldn't answer clearly.
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Caesar Grant
•14 How does this actually work? Do they just call the IRS for you? I'm confused why I couldn't just do that myself...
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Caesar Grant
•3 Yeah right, as if anyone can actually get a human at the IRS to help them. I'll believe it when I see it. I've literally spent hours on hold only to get disconnected.
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Caesar Grant
•9 They don't just call for you - they use a system that navigates the complex IRS phone tree and waits on hold for you. When they finally get a human agent, they connect you directly to that person. So instead of waiting on hold for hours, you just get a call when an agent is actually on the line ready to talk to you. I felt the same way before trying it - figured I could just do it myself. But after wasting an entire afternoon on hold and getting disconnected twice, I was desperate enough to try anything. The time saving alone was worth it for me, especially during busy season when IRS wait times can be 2+ hours.
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Caesar Grant
3 I have to admit I was totally wrong about Claimyr. After my skeptical comment, I decided to try it anyway because I was completely stuck on a self-employment tax issue. I got connected to an IRS agent in about 20 minutes when I had previously spent 3+ hours trying on my own and never got through. The agent helped me understand exactly how much I needed to set aside for my quarterly payments based on my projected income. They also explained which deductions I qualify for as a new business. Definitely changed my perspective on getting help with tax questions!
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Caesar Grant
22 Don't forget to open a separate savings account just for your tax money! That was the best advice I got when I started freelancing. I transfer 28% of every payment I receive into that account and don't touch it except for quarterly payments. Makes life so much easier when tax time comes around. Also, look into an SEP IRA or Solo 401k once you're more established. Those retirement accounts can significantly reduce your taxable income. I didn't do this my first year and regretted it!
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Caesar Grant
•1 Would a regular savings account work for this or should I get something specific? And are retirement accounts really worth it when I'm just starting out?
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Caesar Grant
•22 A regular savings account works perfectly fine for your tax savings - just make sure it's separate from your personal and business operating accounts so you're not tempted to dip into it. Label it something obvious like "TAX MONEY - DO NOT TOUCH" if that helps! As for retirement accounts, they become more valuable as your income increases. In your first year, focus on establishing good bookkeeping habits and building an emergency fund first. Once you're consistently profitable, then look into retirement options as they can significantly reduce your tax bill while also building your future security.
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Caesar Grant
16 Has anyone tried using QuickBooks Self-Employed for tracking expenses and calculating quarterly taxes? I'm wondering if it's worth the subscription cost.
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Caesar Grant
•8 I've been using it for about a year and it's decent. The expense tracking and mileage features are convenient, but their tax calculations have been off for me sometimes. I still end up having my accountant double-check everything. The subscription is kinda expensive for what you get tbh.
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Caesar Grant
•16 Thanks for sharing your experience! That's helpful to know about the tax calculations not being 100% reliable. Maybe I'll just use a spreadsheet system for now since I'm not making that much yet and see if I need something more robust later.
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Caesar Grant
25 One thing nobody's mentioned yet: you might need to pay STATE taxes too, not just federal! For me in California, I set aside an extra 8% just for state taxes on top of the 25% for federal. Check your state tax rates and factor that in!
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Carmen Diaz
Great point about state taxes! Since you're in Ohio, you'll need to factor in Ohio state income tax too. Ohio has a progressive income tax rate that ranges from 0% to 3.99%. For your income level (around $24k annually), you're probably looking at around 1-2% for state taxes. So I'd recommend setting aside about 27-30% total: roughly 25% for federal (income + self-employment tax) and 2-3% for Ohio state taxes. Ohio also requires quarterly estimated payments just like federal, so you can usually pay both at the same time. Don't forget Ohio also has local income taxes in many cities - check if your city has additional income tax requirements. Some cities in Ohio charge an additional 1-3% on top of state taxes. You can check the Ohio Department of Taxation website to see what applies to your specific location.
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