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GreatFX Business Cards Small Business Buzz Estimating Income Tax
Small Business BuzzEstimating Income Tax
A doubleshot of business news espresso with extra froth
Income tax amounts to the other half of total taxes owed each year by small business owners. How much you owe is determined by how much you made after expenses and deductions.
This post will show you how to estimate your income taxed owed in equation form.
First, you should determine what tax bracket you will fall into. Your tax bracket is used to estimate the amount of additional tax you’ll pay if your income increases — or the amount you’ll save if you can claim a deduction.
So for instance, you are married filing jointly and your taxable net earnings is $55,000.00. You will be taxed at the 15% rate.
Don’t forget: The IRS allows you to deduct half of your estimated self employment tax away from your net earnings.
The equation for estimating your income tax looks like this:
(((Net Earnings – (SEtax / 2)) – Income Min. Limit) * Tax Rate) + Minimum Tax
So assuming your estimated net earnings is $55,000 @ 15% (before deducting SEtax) the equation would be figured as:
((($55,000.00 – ($7,771.25 / 2)) – $14,600.00) * .15) + $1,460.00
Income Tax = $6,937.16
With net earnings of $55,000, your estimated total tax owed (incl. self employment tax) would be:
Itax + SEtax = Total Estimated Tax Owed
$6,937.16 + $7,771.25 = $14,708.41
Disclaimer: Tax results submitted to the IRS should be figured by a qualified accounting professional. This method is only for estimating what you will owe to be better prepared.
Estimating Self-Employed Tax
Alternative Minimum Tax
Fair Tax Legislation
Which Business Entity is Right for You? (Part 2)
Reducing Taxable Income w/ Retirement Funds
Personal Savings in Decline
MasterCard Global Small Business Survey 2006
Retirement for the Sole-Proprietor
IRS Payments by Credit Card
IRS Redesigns Form 941
By Chris Brunner
Sunday, August 26th, 2012 @ 7:01 PM CDT
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