Tips on Taxes For Independent Contractors.
It is every person’s responsibility to pay and file their tax returns if they are involved in any economic activity. 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. Here is a guide for independent contractors on what they need to know about taxes.
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. 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. The tax credit mechanism is geared to relieving you of some tax cash amount you are supposed to remit to the IRS. With the aid of a professional or tax software, you can never miss out on the tax credits which will see you retain some cash. 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. There are many deductions which you can look out for and they include a home office deduction, contributions to retirement accounts, deductions to tuition and fees, expenses related to moving for jobs and also student loan interest paid.
During the tax returns filing season, filing your returns may pose a challenge to you. There are multiple options which you can choose during this season and have your taxes in successfully filed. 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. If you want to file the returns personally, you can use the IRS tax filing tool. 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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