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 great proportion of workers are independent contractors, and this makes their tax situation quite different from permanent employees. The uniqueness of independent contractor taxes is prominent in the different tax forms, different tax credit, deductions, and the rates are also varied between different contractors. Here is a guide for independent contractors on what they need to know about taxes.
Independent contractors have to report about their income to the IRS as they are their bosses and they have to represent themselves. The independent contractor also has to ensure that he or she makes payments for personal deductions such as social security and medical care funds. 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.
Tax credits are a great benefit enjoyed by independent contractors. 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. 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. Unlike tax credit, the deductions are geared towards reducing the amount of cash that is eligible for the actual taxation. Contributions to charity, home office deduction, contributions to retirement accounts, deductions to tuition and fees, expenses related to moving for jobs and also student loan interest paid are some of the deductions which cans see you reduce the amount of cash the IRS can tax you.
You may find it challenging to file your tax returns when the season comes. You can successfully file your returns without any worries as there are multiple options available for you. 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. The IRS tax filing tool can also come in handy if you want to file the returns personally. You can also fill out physical tax return forms and send them to the IRS through your mailbox. Lastly, you can use available tax return filing software to file your returns in time and these info. about thisservice can be found on this page.