It is every person’s responsibility to pay and file their tax returns if they are involved in any economic activity. Currently, most people prefer to work as independent contractors whose taxing and taxes are different from other permanent workers. 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.
As an independent contractor your tax affairs are your responsibility, and you have to report on your income to the IRS. The also have to pay for their social security and medical care deductions personally. Independent contractors receive different tax forms as they are taxed differently. 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. The tax credit mechanism is geared to relieving you of some tax cash amount you are supposed to remit 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.
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. The best options when you are looking to have your returns filed successfully and in time is seeking the services of a tax professional. Engaging a tax pro will see you enjoy convenience and you will never miss out on tax 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.