Involvement in any economic activity prompts the payment of taxes, and this is every person’s responsibility. A great proportion of workers are independent contractors, and this makes their tax situation quite different from permanent employees. The tax of different contractors is different from other employees in that it has different rates, different forms, different credits and deductions. 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. Due to the difference in the taxation between independent contractors and other employees, they receive different tax forms. 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. Tax credits will see you retain some of the cash you are supposed to pay in form of taxes 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. The total deductions work by reducing the total amount of taxable income you are considered to have. Contributions to charity, home office deduction, contributions to retirement accounts, deductions to tuition and fees, expenses related to moving for jobs and also student loan interest paid are some of the deductions which cans see you reduce the amount of cash the IRS can tax you.
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. Engaging a tax pro will see you enjoy convenience and you will never miss out on tax deductions and credit. 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. Lastly, you can use available tax return filing software to file your returns in time and these info. about thisservice can be found on this page.