Congrats!

I'm self-employed and here is what I'm planning on doing for 2008 (after learning from some mistakes from 2006 and 2007).

1) for every paycheck I get, 30% is automatically deposited in an account that is used for taxes/savings. The reason why I pick 30% is because I know that my tax rate will be roughly 27-28% (if you're in NYC, that's your usual tax rate if you make less than 78k) and like the extra 2% as a cushion. Plus, 30% is a round number.

2) Since you will no longer be having taxes withheld from your paycheck, the government is going to be annoyed with you. They like their money. You are "required" to pay quarterly taxes. You take your income for that quarter, roughly calculate your taxes and then mail a check to both NY sate and the federal government. If you don't pay quarterly taxes, you will have to pay a penalty which will be around 4-5% of what you owe to the IRS. Since current ING savings rates are less than 5%, you'll end up paying more money than you will make keeping it in the savings account. So pay your quarterly taxes! You'll save money in the long term.

Yes, I am in NYC (dude, we've met before!) and these numbers are awesome.

1. Sounds like a good plan.

2. The tax tables would have a good estimate of what I *should* be paying for each, right? Or can I make estimates based on my old paycheck, and make up the difference later? Or is the other option one of those thing you "learned" that you're not going to do this year?

2. Yeah, the tax tables would be what you "should" be paying. If you overpay during the year, you'll get a rebate at the end so it'll be just like having a regular paycheck with witholding taken out of it. You just need to get within 10% of what you really will owe to not have the penalty kick in. You can make up the difference come april 15, 2008.

Congrats!