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. 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 also have to pay for their social security and medical care deductions personally. Due to the difference in the taxation between independent contractors and other employees, they receive different tax forms. The Schedule-C and Schedule-SE, a Form-1040-ES, and a 1099-MISC are the different tax forms which the independent contractors have to fill up.
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. You can easily get these tax credits with the aid of the services of a professional or a taxation software. 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. 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. 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.
Filing of taxes may pose a challenge to you during the tax filing season. You can successfully file your returns without any worries as there are multiple options available for you. Seeking the services of a tax professional are the best option of having your returns file successfully and on time. 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. You can also fill out physical tax return forms and send them to the IRS through your mailbox. Lastly, you can use available tax return filing software to file your returns in time and these info. about thisservice can be found on this page.