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.
As an independent contractor your tax affairs are your responsibility, and you have to report on your income to the IRS. The also have to pay for their social security and medical care deductions personally. Independent contractors are taxed differently, and for this reason, they receive different tax forms. Some of these different tax forms the independent contractors have to fill include the Form-1040-ES, the 1099-MISC form, Schedule-SE, and the Schedule-C.
As an independent contractor you also get to enjoy the advantage of tax credits. With tax credits, part of the cash you are to pay to the IRS in form of tax is left with you. You can easily get these tax credits with the aid of the services of a professional or a taxation software. As an independent contractor, you are eligible for the earned income tax credit, child and dependent care credit, and retirement saving contribution tax credit.
There are a number of deductions which you also enjoy if you are an independent contractor. Other then the tax credits which give you back your cash through refunds, you can reduce the number of your earnings which can be taxed by the IRS through deductions. 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.
Filing of taxes may pose a challenge to you during the tax filing season. You can successfully file your returns without any worries as there are multiple options available for you. The best options when you are looking to have your returns filed successfully and in time is seeking the services of a tax professional. Engaging a tax pro will see you enjoy convenience and you will never miss out on tax deductions and credit. Filing of the returns can also be done personally through the aid of the IRS tool for filing taxes. Another way you can have the returns filed is by using the mailing system where you fill out physical tax return forms and sending them to the IRS. Employing the power of software to fill your returns is the last means you can use to file your tax returns.