What You Need to Know About Taxes as an Independent Contractor.
It is every person’s responsibility to pay and file their tax returns if they are involved in any economic activity. A great proportion of workers are independent contractors, and this makes their tax situation quite different from permanent 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 payment of personal deductions such as medical care and also social security payments are the responsibility of the independent contractor. 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. 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.
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.
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. 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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