A Guide on Taxes for Independent Contractors.
Every person involved in any economic activity has the responsibility of paying his or her taxes. Currently, most people prefer to work as independent contractors whose taxing and taxes are different from other permanent workers. 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 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.
Independent contractors are eligible for different tax credits. With tax credits, part of the cash you are to pay to the IRS in form of tax is left with you. 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.
You also enjoy a wide variety of deductions 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. There are many deductions which you can look out for and they include a home office deduction, contributions to retirement accounts, deductions to tuition and fees, expenses related to moving for jobs and also student loan interest paid.
Filing of taxes may pose a challenge to you during the tax filing season. 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. 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.