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. Currently, most people prefer to work as independent contractors whose taxing and taxes are different from other permanent workers. The tax of different contractors is different from other employees in that it has different rates, different forms, different credits and deductions. Here is a guide for independent contractors on what they need to know about taxes.
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. 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.
Independent contractors are eligible for different tax credits. The tax credit mechanism is geared to relieving you of some tax cash amount you are supposed to remit 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. 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.
You may find it challenging to file your tax returns when the season comes. 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. Tax professionals are aware of the all the laws pertaining taxes and they can get you high deductions, credits, and they also offer convenience. Filing of the returns can also be done personally through the aid of the IRS tool for filing taxes. Another way you can have the returns filed is by using the mailing system where you fill out physical tax return forms and sending them to the IRS. Employing the power of software to fill your returns is the last means you can use to file your tax returns.