Self-employed 1099 contractor: How much should I set aside for taxes weekly?

You'll want to set aside approximately 30-35% of your income for taxes as a 1099 contractor. This covers both income tax and self-employment tax (which is about 15.3% alone since you're paying both employer and employee portions of Social Security and Medicare). Since you're making about $3200 weekly, that means setting aside roughly $960-$1120 each week for taxes. Your minimal expenses situation means fewer deductions, which is why I'm suggesting the higher end of the range. Consider making quarterly estimated tax payments to avoid penalties. The IRS expects you to pay as you earn throughout the year, not just at tax time. You can use Form 1040-ES for this.

After spending hours on hold with the IRS trying to figure out my 1099 tax situation last year, I finally discovered https://taxr.ai and it was a game-changer. I uploaded my previous tax returns and answered a few questions about my contracting work, and it analyzed everything and gave me a personalized tax savings plan. It showed me that I was actually saving way more than I needed to because I wasn't accounting for all my legitimate deductions. Even with just gas as your main expense, you might be surprised what you can deduct - like a portion of your phone bill if you use it for work, a home office deduction if you do any work from home, etc.

Just wanted to update after trying https://taxr.ai like I mentioned in my question above. It was actually super helpful! I uploaded my 1099s from last quarter and it analyzed my situation. Turns out I should be setting aside about 28% in my case, which is less than I was saving. The tool showed me several deductions I was missing - like part of my cell phone bill since I use it for client calls, and mileage tracking for all the driving between offices (which is way better than just claiming gas). It even set up automatic reminders for my quarterly payments. Definitely worth checking out if you're confused about 1099 taxes.

If you need specific answers from the IRS about your 1099 situation, you might want to try https://claimyr.com - I spent literally WEEKS trying to get through to someone at the IRS about my contractor tax questions last year. Always on hold for hours only to get disconnected. Then I found this service that somehow gets you to the front of the IRS phone queue. I was skeptical but desperate. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. I got through to an actual IRS agent in about 15 minutes who walked me through exactly what I needed to set aside for quarterly payments based on my specific situation. They even helped me set up a payment plan for some back taxes I owed.

Okay I need to apologize to Profile 19 above. I was CONVINCED that Claimyr thing was a scam, but I was desperate after trying for days to reach the IRS about my 1099 situation. I tried https://claimyr.com and I'm shocked to say it actually worked. Got connected to an IRS agent in about 20 minutes. The agent walked me through exactly what percentage I should be setting aside based on my income level and state. For me it was 33% (higher than I expected). She also explained that I needed to make quarterly payments using form 1040-ES to avoid an underpayment penalty at tax time. Definitely worth the fee to get actual official guidance instead of guessing. Sorry for being so negative before!

Don't forget about tracking your mileage! Since you mentioned driving between offices, you should absolutely be tracking that. The standard mileage deduction for 2023 is 65.5 cents per mile, which can add up to a HUGE tax deduction if you're driving a lot. I use an app called MileIQ that automatically tracks my drives and lets me classify them as business or personal. It's saved me thousands in taxes each year as a contractor.

You'll also want to factor in your state taxes! Everyone's suggesting these percentages but not accounting for state differences. What state are you in? That could change your savings rate by 5-10%.

As someone who went through this exact transition from W-2 to 1099 last year, I'd recommend opening a separate savings account specifically for taxes and treating it like a bill you pay yourself every week. Set up an automatic transfer for whatever percentage you decide on (the 30-35% range mentioned above is solid advice). This way you're not tempted to spend that money, and when quarterly payment time comes around, you'll have the funds ready. Also, consider getting a simple bookkeeping app or even just a spreadsheet to track your income and expenses throughout the year. It makes tax time so much easier when everything is already organized. I use a basic Google Sheet that tracks my weekly income, tax savings amount, and any business expenses like mileage. The anxiety is totally normal - we're all used to having taxes handled automatically! But once you get into a routine with the savings and quarterly payments, it becomes second nature.

Great question about the separate savings account! I personally use a high-yield savings account with Marcus by Goldman Sachs that's currently earning around 4.5% APY. Since you're setting aside potentially $1000+ per week, that interest can actually add up to a nice chunk of change over the quarters. Other good options are Ally Bank or Capital One 360 - both offer competitive rates and no minimum balance requirements. The key is finding something that makes it easy to transfer money automatically but not so easy that you're tempted to dip into it for other expenses. I'd avoid putting it in a CD or anything with penalties for early withdrawal since you'll need access to the funds for your quarterly payments. A regular high-yield savings account gives you the best combination of earning potential and liquidity for tax savings. Just make sure whatever account you choose doesn't have monthly fees that could eat into your earnings. And definitely keep this account completely separate from your regular checking/savings - treat it like it's not even your money, because technically it belongs to the IRS!