Every person involved in any economic activity has the responsibility of paying his or her taxes. Currently, most people prefer to work as independent contractors whose taxing and taxes are different from other permanent workers. 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.
As an independent contractor your tax affairs are your responsibility, and you have to report on your income to the IRS. The also have to pay for their social security and medical care deductions personally. 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.
Tax credits are a great benefit enjoyed by independent contractors. With tax credits, part of the cash you are to pay to the IRS in form of tax is left with you. 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.
There are a number of deductions which you also enjoy if you are an independent contractor. 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. 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.
Filing of taxes may pose a challenge to you during the tax filing season. 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. The IRS tax filing tool can also come in handy if you want to file the returns personally. You can also fill out physical tax return forms and send them to the IRS through your mailbox. Employing the power of software to fill your returns is the last means you can use to file your tax returns.