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 tax of different contractors is different from other employees in that it has different rates, different forms, different credits and deductions. Here is a guide for independent contractors on what they need to know about taxes.
As an independent contractor your tax affairs are your responsibility, and you have to report on your income to the IRS. 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. These forms include the Schedule-C, the Schedule-SE, a Form-1040-ES and a 1099-MISC form.
As an independent contractor you also get to enjoy the advantage of tax credits. Tax credits will see you retain some of the cash you are supposed to pay in form of taxes 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. Earned income tax credit, child and dependent care credit, and retirement saving contribution credit are the common tax relief credits you can get as an independent contractor.
If you are an independent contractor, you are also eligible for a wide variety of deductions. 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.
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. Other than convenience, you also enjoy the tax professionals knowledge of tax laws and you can get the deductions and credit. Filing of the returns can also be done personally through the aid of the IRS tool for filing taxes. 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.