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Greetings, I am a medical resident who moonlighted for some shifts in the ER over a 4 month period this past fall. This increased my wages by $2920 and no withholding of any kind was taken out of my moonlighting paychecks. I was informed that my paychecks were being processed with my employment status as an independent contractor and I am responsible for paying the required federal and state taxes out of pocket.

Being too poor to pay to have my taxes done, I tried to figure them out myself. What I came up with was to prepare schedule C-EZ and schedule SE for that $2920 (reduced by $52.44 for commuting expenses = $2867.56 net). My base resident's salary in 2001 was around $37,000 and I had interest earned of around $370. I also had to pay taxes on the 4th of 4 ratable portions of a Roth conversion I did in 1998, amounting to $19522 this year. I had already determined how much to have withheld from each biweekly paycheck to cover the expected federal and state taxes on the base salary and Roth conversion. My employer also automatically deducted for social security and FHI. Only the moonlighting earnings fell under the independent contractor status and will be reported on schedules C-EZ and SE.

I am trying to figure out several things:
1) Did I choose the right schedules for the moonlighting earnings? Is there any chance that my medical license fee can be considered a deductible expense? (I assumed not, but if it COULD be, there is another potential $550 I could take off my earnings.)

2) What is the ACTUAL rate of tax I am paying on this $2867.56? I am somewhat confused by how this balance has taxes figured on it to the tune of (0.9235 * 0.153 * $2867.56 = $405.17) which gets added in to the taxes I owe on the other net income mentioned above, yet HALF of this tax ($202.59) gets subtracted off of total income while $2867.56 gets added into total income. Thus my AGI is ($37,000 + $370 + $19,522 + $2867.56 - $202.59) and ultimate taxes owed are figured on this aggregate balance less standard deduction and exemption (for a single person, no dependents, under 65 and not blind this amounts to another $4550 + $2900 taken off my AGI) - and THEN $405.17 gets added to the tax on top of that. Huh??

Can anyone help explain to me how to figure out just what this means in terms of the true tax rate owed on the moonlighting money? If I am doing something wrong in the calculation or have chosen the wrong schedules, please advise. If I moonlight again in 2002, I will need to save the taxes out of any moonlighing wages paid and I want to be sure I am setting aside the right amount. The state amounts owed follow from the federal amounts owed, so if I am getting the federal figures down correctly, I can determine what I will owe to the state. THANKS IN ADVANCE for any available insight or help!

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