Tips on Taxes For Independent Contractors.
It is every person’s responsibility to pay and file their tax returns if they are involved in any economic activity. A large percentage of the workforce are independent contractors, and their taxes are a bit complicated than other employees. 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 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. 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.
As an independent contractor you also get to enjoy the advantage of tax credits. With tax credits, part of the cash you are to pay to the IRS in form of tax is left with you. You can easily get these tax credits with the aid of the services of a professional or a taxation 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. 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. If you are looking to have your return filed in time and successfully, consider seeking the services of a tax professional. Other than convenience, you also enjoy the tax professionals knowledge of tax laws and you can get the deductions and credit. If you want to file the returns personally, you can use the IRS tax filing tool. You can also fill out physical tax return forms and send them to the IRS through your mailbox. The last technique you can use to fill your returns is through software designed to file the returns.