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. 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. If you are an independent contractor, here is what you need to know about your taxes.
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. 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. 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.
There are a number of deductions which you also enjoy 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.
You may find it challenging to file your tax returns when the season comes. 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. Tax professionals are aware of the all the laws pertaining taxes and they can get you high deductions, credits, and they also offer convenience. If you want to file the returns personally, you can use the IRS tax filing tool. 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. The last technique you can use to fill your returns is through software designed to file the returns.