A Guide on Taxes for Independent Contractors.
Every person involved in any economic activity has the responsibility of paying his or her taxes. A large percentage of the workforce are independent contractors, and their taxes are a bit complicated than other employees. 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. If you are an independent contractor, here is what you need to know about your taxes.
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. 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. 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. Unlike tax credit, the deductions are geared towards reducing the amount of cash that is eligible for the actual taxation. 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. 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. Tax professionals are aware of the all the laws pertaining taxes and they can get you high deductions, credits, and they also offer convenience. If you want to file the returns personally, you can use the IRS tax filing tool. You can also fill out physical tax return forms and send them to the IRS through your mailbox. The last technique you can use to fill your returns is through software designed to file the returns.