A Guide on Taxes for Independent Contractors.
Every person involved in any economic activity has the responsibility of paying his or her taxes. A large percentage of the workforce are independent contractors, and their taxes are a bit complicated than other employees. Independent contractor taxes are unique as they have a different form and tax credit, different deductions, and the rate also varies with different independent contractors. Here is a guide for independent contractors on what they need to know about taxes.
The responsibility of reporting on your income to the IRS is yours if you operate as an independent contractor. The independent contractor also has to ensure that he or she makes payments for personal deductions such as social security and medical care funds. 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.
Independent contractors are eligible for different tax credits. The tax credit mechanism is geared to relieving you of some tax cash amount you are supposed to remit 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.
There are a number of deductions which you also enjoy if you are an independent contractor. Unlike tax credit, the deductions are geared towards reducing the amount of cash that is eligible for the actual taxation. 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. There are multiple options which you can choose during this season and have your taxes in successfully filed. If you are looking to have your return filed in time and successfully, consider 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. The IRS tax filing tool can also come in handy if you want to file the returns personally. Physical forms can also be filled out and sent to the IRS via mail as it is an accepted way you can use in filing your returns. Employing the power of software to fill your returns is the last means you can use to file your tax returns.