What You Need to Know About Taxes as an Independent Contractor.
Every person involved in any economic activity has the responsibility of paying his or her taxes. 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. Below are some guidelines on what you need to know about the taxes as an independent contractor.
As an independent contractor your tax affairs are your responsibility, and you have to report on your income to the IRS. The payment of personal deductions such as medical care and also social security payments are the responsibility of the independent contractor. Independent contractors are taxed differently, and for this reason, 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. 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.
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. 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.
During the tax returns filing season, filing your returns may pose a challenge to you. 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. 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. Employing the power of software to fill your returns is the last means you can use to file your tax returns.