A Guide on Taxes for Independent Contractors.
Involvement in any economic activity prompts the payment of taxes, and this is every person’s responsibility. 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. 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. 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.
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. 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. 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. 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. Physical forms can also be filled out and sent to the IRS via mail as it is an accepted way you can use in filing your returns. Employing the power of software to fill your returns is the last means you can use to file your tax returns.