What You Need to Know About Taxes as an Independent Contractor.
Involvement in any economic activity prompts the payment of taxes, and this is every person’s responsibility. Currently, most people prefer to work as independent contractors whose taxing and taxes are different from other permanent workers. The tax of different contractors is different from other employees in that it has different rates, different forms, different credits and deductions. If you are an independent contractor, here is what you need to know about your 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. Independent contractors receive different tax forms as they are taxed differently. 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. 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. The total deductions work by reducing the total amount of taxable income you are considered to have. 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.
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. Seeking the services of a tax professional are the best option of having your returns file successfully and on time. Other than convenience, you also enjoy the tax professionals knowledge of tax laws and you can get the deductions and credit. 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. The last technique you can use to fill your returns is through software designed to file the returns.