A Guide on Taxes for Independent Contractors.
Involvement in any economic activity prompts the payment of taxes, and this is every person’s responsibility. A large percentage of the workforce are independent contractors, and their taxes are a bit complicated than other employees. The tax of different contractors is different from other employees in that it has different rates, different forms, different credits and deductions. Below are some guidelines on what you need to know about the taxes as an independent contractor.
The responsibility of reporting on your income to the IRS is yours if you operate as an independent contractor. The also have to pay for their social security and medical care deductions personally. Due to the difference in the taxation between independent contractors and other employees, they receive different tax forms. The Schedule-C and Schedule-SE, a Form-1040-ES, and a 1099-MISC are the different tax forms which the independent contractors have to fill up.
As an independent contractor you also get to enjoy the advantage of tax credits. Tax credits will see you retain some of the cash you are supposed to pay in form of taxes to the IRS. You can easily get these tax credits with the aid of the services of a professional or a taxation software. Earned income tax credit, child and dependent care credit, and retirement saving contribution credit are the common tax relief credits you can get as an independent contractor.
If you are an independent contractor, you are also eligible for a wide variety of deductions. The total deductions work by reducing the total amount of taxable income you are considered to have. Some of the deductions which can see you pay a lower amount of cash to the IRS in taxes include home office deduction, contributions to retirement accounts, deductions to tuition and fees, expenses related to moving for jobs and also interests paid on student loans.
During the tax returns filing season, filing your returns may pose a challenge to you. You can successfully file your returns without any worries as there are multiple options available for you. Seeking the services of a tax professional are the best option of having your returns file successfully and on time. Other than convenience, you also enjoy the tax professionals knowledge of tax laws and you can get the deductions and credit. The IRS tax filing tool can also come in handy if you want to file the returns personally. You can also fill out physical tax return forms and send them to the IRS through your mailbox. The last technique you can use to fill your returns is through software designed to file the returns.