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. If you are an independent contractor, here is what you need to know about your taxes.
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 receive different tax forms as they are taxed differently. 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.
Independent contractors are eligible for different tax credits. 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. 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. 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.
You may find it challenging to file your tax returns when the season comes. You can successfully file your returns without any worries as there are multiple options available for you. The best options when you are looking to have your returns filed successfully and in time is seeking the services of a tax professional. 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. 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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