Hi,
I'm a sole-proprietor (I do photography work), and on a recent job I brought my 13 y.o. son along to assist me and told him I'd pay him 25% of the income from the job The job paid $4,000 flat, pre-tax, so I gave him $1,000. Now, I'm not going to bill him for the taxes on that, and he doesn't file his own at this point, but for my own records I'm wondering how I can calculate how much of a tax hit I'M going to be eating (because I'm obviously going to be taxed on that $4,000, so if I gave him 25% of the the POST-TAX income for that job, it would of course be less than $1,000. I'm trying to figure out how much less.
My thought would be to prepare my taxes as usual at the end of the year (I use TurboTax), and then write down the amounts of the Federal and State taxes I owe. THEN, to calculate the amount I'm being taxed on JUST that $4,000, go back and subtract $4K from my 1099 income reporting, which would generate a lower Federal and State tax bill. Finally, subtract the lower bill form the higher bill and the difference would be the amount of tax I'm paying on JUST that $4,000.
Does that make sense? Or is there another way to calculate how much I'll have to pay on that $4K job?
Thanks for any advice at all.
CI
I'm a sole-proprietor (I do photography work), and on a recent job I brought my 13 y.o. son along to assist me and told him I'd pay him 25% of the income from the job The job paid $4,000 flat, pre-tax, so I gave him $1,000. Now, I'm not going to bill him for the taxes on that, and he doesn't file his own at this point, but for my own records I'm wondering how I can calculate how much of a tax hit I'M going to be eating (because I'm obviously going to be taxed on that $4,000, so if I gave him 25% of the the POST-TAX income for that job, it would of course be less than $1,000. I'm trying to figure out how much less.
My thought would be to prepare my taxes as usual at the end of the year (I use TurboTax), and then write down the amounts of the Federal and State taxes I owe. THEN, to calculate the amount I'm being taxed on JUST that $4,000, go back and subtract $4K from my 1099 income reporting, which would generate a lower Federal and State tax bill. Finally, subtract the lower bill form the higher bill and the difference would be the amount of tax I'm paying on JUST that $4,000.
Does that make sense? Or is there another way to calculate how much I'll have to pay on that $4K job?
Thanks for any advice at all.
CI
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