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. A large percentage of the workforce are independent contractors, and their taxes are a bit complicated than other employees. The uniqueness of independent contractor taxes is prominent in the different tax forms, different tax credit, deductions, and the rates are also varied between different contractors. Below are some guidelines on what you need to know about the taxes as an independent contractor.
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. Independent contractors are taxed differently, and for this reason, they receive different tax forms. 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.
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. If you want to get the tax credit and the extra cash in your pocket, you can seek the service of a tax professional or remit your tax through a taxa 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.
There are a number of deductions which you also enjoy if you are an independent contractor. 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.
You may find it challenging to file your tax returns when the season comes. 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. Tax professionals are aware of the all the laws pertaining taxes and they can get you high deductions, credits, and they also offer convenience. 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. The last technique you can use to fill your returns is through software designed to file the returns.
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