What You Need to Know About Taxes as an Independent Contractor.
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. The tax of different contractors is different from other employees in that it has different rates, different forms, different credits and deductions. Below are some guidelines on what you need to know about the taxes as an independent contractor.
Independent contractors have to report about their income to the IRS as they are their bosses and they have to represent themselves. The payment of personal deductions such as medical care and also social security payments are the responsibility of the independent contractor. Independent contractors are taxed differently, and for this reason, they receive different tax forms. 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.
There are a number of deductions which you also enjoy if you are an independent contractor. 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. 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. Employing the power of software to fill your returns is the last means you can use to file your tax returns.
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