While those may be the statutory tax rate, your effective tax rate is the percentage you actually pay. A good CPA or tax attorney can help reduce your effective tax rate with tax savings strategies. You should hire an attorney, CPA, or both (like me) to prepare your taxes to ensure you are taking all the deductions you are entitled to.
Best of luck,
Andrew B Gordon is a CPA and attorney licensed to practice law in Illinois. The information provided here is for educational purposes only and is not intended as legal advice for a particular matter. This response does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult an attorney.
Andrew is on target with his answer below: while the 40% estimate represents your statutory tax rate, your effective tax rate may be much lower because of deductions. If you think of the $64k as revenue, your business costs will reduce your taxable income significantly.
Here is a little action plan:
1. Learn more about deductible expenses.
2. Keep decent records of your deductible expenses.
3. Set aside your estimate tax liability each month.
4. FIle an accurate and timely tax return.
Now, you may be able to do all of this on your own with some careful research and something like TurboTax. You other option is to pay for a consultation with a CPA, who will help teach you what you need to know and do in detail. Your other (other) option is to pay a CPA to do it all for you.
I hope this helps. Feel free to get in touch with me (or any other advisor!) for a complimentary consultation to discuss further.
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My colleagues are spot on with their responses. Your effective tax rate and the statutory rates are different animals. You should consult with a local tax attorney or CPA for guidance and assistance to be sure you maximize your returns.
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