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 uniqueness of independent contractor taxes is prominent in the different tax forms, different tax credit, deductions, and the rates are also varied between different contractors. Here is a guide for independent contractors on what they need to know about taxes.
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. 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. Tax credits will see you retain some of the cash you are supposed to pay in form of taxes to the IRS. 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. 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.
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. 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. If you want to file the returns personally, you can use the IRS tax filing tool. 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.