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 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 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. The tax credit mechanism is geared to relieving you of some tax cash amount you are supposed to remit to the IRS. If you want to get the tax credit and the extra cash in your pocket, you can seek the service of a tax professional or remit your tax through a taxa software. There are three common tax credits that are common for independent contractors, and they include earned income tax credit, children and dependent care credit, and retirement savings contribution credit.
There are a number of deductions which you also enjoy if you are an independent contractor. Other then the tax credits which give you back your cash through refunds, you can reduce the number of your earnings which can be taxed by the IRS through deductions. 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.
During the tax returns filing season, filing your returns may pose a challenge to you. You can successfully file your returns without any worries as there are multiple options available for you. The best options when you are looking to have your returns filed successfully and in time is 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. Filing of the returns can also be done personally through the aid of the IRS tool for filing taxes. 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. The last technique you can use to fill your returns is through software designed to file the returns.