Calculating Tax On A W-9 Income
Taxes are stressful, let’s just be honest. For many independent contract workers or business owners, taxes can become even more of a stress factor. Though tax season is done, it’s never too late to start preparing for the next tax season so that you aren’t taken back by any financial surprises.
If you are on a w-9 income, here is everything you need to know about calculating your taxes. In general, income that results from a W-9 arrangement is not subject to IRS withholding. Rather, it is the payee's responsibility to claim the income on his or her tax return and to pay any appropriate taxes. For example, the income you receive from freelance work is generally taxed as self-employment income, which may require the payee to make estimated tax payments throughout the year.
If your income from a W-9 arrangement is subject to backup withholding, the current flat-rate set by the IRS is 28%. To calculate how much you can expect to be withheld, simply multiply your W-9 income by 0.28.
Finally, it's important to be aware that if you do have money withheld from W-9 income as backup withholding, you should claim it as money withheld when you file your tax return. Even though the flat backup withholding rate is 28%, your actual tax liability may be more or less than this amount, and your tax return will determine if you are entitled to a refund, or if you need to pay more.
When it comes time to file, reach out to us. We are ready to help you with all your needs. Have a question? Contact us here!