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. 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. Some of these different tax forms the independent contractors have to fill include the Form-1040-ES, the 1099-MISC form, Schedule-SE, and the Schedule-C.
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. You can easily get these tax credits with the aid of the services of a professional or a taxation software. There are three common tax credits that are common for independent contractors, and they include earned income tax credit, children and dependent care credit, and retirement savings contribution credit.
You also enjoy a wide variety of deductions 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.
Filing of taxes may pose a challenge to you during the tax filing season. This should not worry you as there are multiple options which you can go for and succeed in filing your returns. Seeking the services of a tax professional are the best option of having your returns file successfully and on time. Engaging a tax pro will see you enjoy convenience and you will never miss out on tax deductions and credit. The IRS tax filing tool can also come in handy if you want to file the returns personally. 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.
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