How can I reasonably estimate what percentage of my income should be saved for taxes during my first year of work
I am a minor in Michigan, and I'm currently in my first financial year. I work for a nonprofit, which doesn't take any money out of my pay. The per-hour salary that I say I make is how much I actually receive on my pay-day.
Because this is my first financial year, I want to be able to reasonably know how much I need to save for April. Is there a good way I could estimate the upper bound of what percentage of my income goes to taxes?
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If you'll earn less than K then you won't owe Fed (or probably State) Income tax. You'll still owe self-employed SS & Medicare, though, which is about 12%. Thus, that's how much I'd save for taxes.
From the comments it sounds like you are a contractor. So at a minimum you will owe social security and FICA along with what is sometimes called self employment tax. Social Security is 6% and the self employment component of Social Security is also 6%. Then you have FICA and the self employment portion of FICA as well.
I would recommend you engage an accountant. As a contractor you may be eligable for a lot of income reducing expenses. If the non-profit is a church and you are a 'church worker' possibly even more. Seek out an accountant that fits your profile.
After the first year you can use what you learned from the accountant to do subsequent years or you may find the cost of the account beneficial. It should not cost you more than a few hundred dollars and those may be deductible.
You also need to be making quarterly payments of estimated taxes or you may owe a penalty at the end of the year. The accountant can help with this as well. Being first year there may be more flexibility in this.
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