Taxes on Straight Commission?
How much should you set aside for taxes if you work on commission?
ANSWER: Read what Norm Rollins says:
He should set aside 40 cents on every net dollar. If he’s a 1099 commission salesman, he’s going to file a Schedule C income tax plus Social Security tax, which ends up being about 40% of his net income.
Open a separate bank account in which you deposit your estimated taxes. Don’t just dump the money in the family checking account. As a matter of fact, do the following three steps:
1. Open a separate checking account for all his commission.
2. Any expenses he has related to the business – cell phone, business cards, travel – write the check out of that account.
3. Anything left in there is profit. Then set aside 25% - 30% of that profit and put it in another savings account for paying taxes. You’re basically withholding on yourself. Then when you go to pay your quarterlies, you’ll have the money.