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 great proportion of workers are independent contractors, and this makes their tax situation quite different from permanent employees. The uniqueness of independent contractor taxes is prominent in the different tax forms, different tax credit, deductions, and the rates are also varied between different contractors. Here is a guide for independent contractors on what they need to know about taxes.
Independent contractors have to report about their income to the IRS as they are their bosses and they have to represent themselves. The payment of personal deductions such as medical care and also social security payments are the responsibility of the independent contractor. Due to the difference in the taxation between independent contractors and other employees, they receive different tax forms. These forms include the Schedule-C, the Schedule-SE, a Form-1040-ES and a 1099-MISC form.
As an independent contractor you also get to enjoy the advantage of tax credits. The tax credit mechanism is geared to relieving you of some tax cash amount you are supposed to remit to the IRS. If you want to get the tax credit and the extra cash in your pocket, you can seek the service of a tax professional or remit your tax through a taxa 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.
You also enjoy a wide variety of deductions if you are an independent contractor. 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. If you are looking to have your return filed in time and successfully, consider seeking the services of a tax professional. Other than convenience, you also enjoy the tax professionals knowledge of tax laws and you can get the 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.