I invoiced $4,000 last month cutting videos for creators. My homie says I really only made like $2,600. Is he lying?
Numbers shared: $4,000 invoiced, about $400 on editing software and a hard drive
He's close. Out of $4,000 in, about $2,659.34 is actually yours once self-employment tax and an income tax set-aside come out.
Revenue isn't pay
Revenue is what clients paid you. Pay is what's left after the costs of doing the work and the tax on it.
On a W-2 job your employer covers half of Social Security and Medicare and pulls your half out before you ever see the check. On 1099 you're both sides, so it's 15.3% on most of your profit (the IRS counts 92.35% of it), and nobody withholds it for you.
Income tax comes on top of that. We used a 12% set-aside as a placeholder; your real rate depends on your whole year.
About 66 cents of every dollar you invoice is yours. Tax starts from profit ($3,600), not from what you invoiced.
Takes five minutes. Keep it on your phone; we don't need to see it.
- Add up what came in last month and what the work cost you.
- Look up this year's estimated tax due dates on IRS.gov (search Form 1040-ES).
- Put the next due date in your calendar.
Your situation is yours
A CPA or enrolled agent can tell you what you actually owe and which costs count. Bring them these numbers.
How we did the math: Treats this month as a typical slice of the year. Federal only; no state tax, credits, QBI or half-SE-tax deduction. Income tax line is a savings placeholder, not a bill.
✓ Reviewed by Censi · Example · Education only
This is education, not personalized financial, tax or legal advice. You make the call; for your exact situation, a licensed pro can confirm.