What You Need to Know About Taxes as an Independent Contractor.
It is every person’s responsibility to pay and file their tax returns if they are involved in any economic activity. 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. 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 are taxed differently, and for this reason, 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. As an independent contractor, you are eligible for the earned income tax credit, child and dependent care credit, and retirement saving contribution tax 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. 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.
Filing of taxes may pose a challenge to you during the tax filing season. There are multiple options which you can choose during this season and have your taxes in successfully filed. 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. Filing of the returns can also be done personally through the aid of the IRS tool for filing taxes. 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. Employing the power of software to fill your returns is the last means you can use to file your tax returns.