Tips 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. 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.
Independent contractors have to report about their income to the IRS as they are their bosses and they have to represent themselves. The also have to pay for their social security and medical care deductions personally. Independent contractors receive different tax forms as they are taxed differently. 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. 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. As an independent contractor, you are eligible for the earned income tax credit, child and dependent care credit, and retirement saving contribution tax credit.
If you are an independent contractor, you are also eligible for a wide variety of deductions. 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. 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. Engaging a tax pro will see you enjoy convenience and you will never miss out on tax deductions and credit. 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.