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Posted by Pat Raskob

Guidelines to Filing Tax as an Individual Contractor

Guidelines to Filing Tax as an Individual Contractor

Every independent contractor is considered self-employed by the IRS (internal revenue service). An independent contractor can operate as a limited liability company, a sole proprietor, or S-corporation. Lots of businesses in the US have sole proprietors as managers.

When it comes to filing taxes, it’s a little more complicated for independent contractors. They'll need to file additional forms and estimated taxes regularly. Independent contractors need to pay self-employment tax with federal and state income tax.

For better understanding, we need to discuss estimated tax payments.

The IRS requires that self-employed individuals make quarterly estimated tax payments in place of substantial total costs. It is an approximated fee because you get to estimate the income you are likely to get and deposit the money based on the calculations. Usually, these payments are made in April, June, September, and January of the following year.

Form 1040-ES can help you calculate your estimated tax payment; it has a worksheet designed for this purpose. The booklet contains vouchers to help you make payments through emails or online.

You pay at intervals in April, June, September, and January of the following year.

It’s easy to estimate tax payments with Form 1040-ES. It’s made up of a worksheet that enables you to sort out the taxes. It’s equally possible to utilize vouchers with a 1040-ES booklet for payment using mail or online means.

You must make the correct estimation to prevent financial distress. If you overpay, you can always get a reimbursement.

Paying Tax as an individual contractor

The following steps can guide you when you want to file your Tax as an individual contractor

Compile your documents

You will need to compile all the essential files and documents for your business income and revenue. These documents comprise your 1099s, dividend or interest statement, W-2s. You will need all the vital details compiled together.

Prepare your records

The moment all the information concerning your income is in one place, you will need to document your expenditure carefully- if you have been recording all your transactions for the year, it will be easier to put all your costs together.

Having a good record of the expenses of your business with transaction receipts, you can use this to your advantage as it qualifies you for allowable deductions. The deductions can influence your total tax liability, causing a reduction- sometimes even enough to qualify for tax reimbursement.

Hence the importance of making sure all your transactions are documented, and all your receipts are kept because the IRS will want proof if you get audited.

Make use of and learn from the services of a tax professional

It is best to work with a licensed tax professional to ensure your taxes are correctly filed to prevent penalties or issues with the IRS. Also, they can offer helpful advice when it comes to your tax estimation.

Do it yourself or through a professional.

We’d advise that you work with a licensed tax professional to ensure that your taxes are filed correctly and not get caught up in being penalized by the IRS. They can also provide the tricks and tips you need on your approximated tax or developing the accounting system.

If you feel like you can handle your tax filing yourself, make sure you get adequate information or learn from professionals. So you won't be lagging in any area.

Mailing or submitting your tax forms online is also relatively easy. You can always download the tax forms from the IRS website then create an account. The funds can be sent through a digital wallet, bank accounts, debit cards, and credit cards. There are a couple of legal, commercial tax preparation software around you can also make use of. With this, you wouldn't have to be bothered about missing papers, and you can keep track of your detailed payment.



Pat Raskob
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