What You Need to Know About Taxes as an Independent Contractor.
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. 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. 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 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. 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.
Tax credits are a great benefit enjoyed by independent contractors. Tax credits will see you retain some of the cash you are supposed to pay in form of taxes to the IRS. With the aid of a professional or tax software, you can never miss out on the tax credits which will see you retain some cash. There are three common tax credits that are common for independent contractors, and they include earned income tax credit, children and dependent care credit, and retirement savings contribution credit.
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. Contributions to charity, home office deduction, contributions to retirement accounts, deductions to tuition and fees, expenses related to moving for jobs and also student loan interest paid are some of the deductions which cans see you reduce the amount of cash the IRS can tax you.
During the tax returns filing season, filing your returns may pose a challenge to you. This should not worry you as there are multiple options which you can go for and succeed in filing your returns. The best options when you are looking to have your returns filed successfully and in time is seeking the services of a tax professional. Tax professionals are aware of the all the laws pertaining taxes and they can get you high deductions, credits, and they also offer convenience. The IRS tax filing tool can also come in handy if you want to file the returns personally. 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.