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. 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. Below are some guidelines on what you need to know about the taxes as an independent contractor.
The responsibility of reporting on your income to the IRS is yours if you operate as an independent contractor. 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. 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. Earned income tax credit, child and dependent care credit, and retirement saving contribution credit are the common tax relief credits you can get as an independent contractor.
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. There are many deductions which you can look out for and they include a home office deduction, contributions to retirement accounts, deductions to tuition and fees, expenses related to moving for jobs and also student loan interest paid.
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. Engaging a tax pro will see you enjoy convenience and you will never miss out on tax deductions and credit. 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.
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