Do you work as an independent contractor?
If so, you may be struggling to file your taxes properly. Filing taxes as an independent contractor is not as straightforward as someone filing, which has a full-time, salaried job. The process can be complicated if you don’t plan, do some research, and stay organized throughout the year.
Keep reading to learn more about how to determine if you’re an independent contractor and some tips that will help you file taxes properly.
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Who Is an Independent Contractor?
Working relationships aren’t always simple to define, so the first step is figuring out if your employer or employers classify you as a contractor or not.
In general, the IRS will classify you as a contractor if the business or person paying you for your work only dictates what product or service they get, not how you complete the job or your day-to-day activities, as they would a full-time employee.
When you’re an independent contractor, you’ll likely receive a 1099 form from the business or person you’re working for. Keep these forms handy because they will make filing your taxes much easier.
Five Tips for Filing Taxes as an Independent Contractor
Filing taxes is a complicated process for most of us, and there are extra hurdles when you’re a contractor. Here are five tips that will make the process easier:
1. Keep Track of What Taxes You Have to Pay
Independent contractors have to pay a self-employment tax in addition to federal and state taxes. The self-employment tax is similar to medicare tax and social security tax that full-time employees have automatically deducted from their paychecks.
2. Deduct Proper Business Expenses
Contractors are allowed to write off business expenses, but it’s important to keep track of all your expenses and what you used them for. Deductible business expenses often include things like rent for business space, travel costs, legal fees, and more.
3. Pay On Time
As an independent contractor, you’ll have to pay quarterly taxes rather than annually. These quarterly due dates are typically January 15th, April 15th, June 15th, and September 15th. Failing to pay quarterly taxes could mean serious penalties from the IRS.
4. Stay Organized
Staying organized as an independent contractor is crucial for success. Keep all of your forms and receipts handy, and don’t throw them away at the end of the year in case you need them later for proof. It’s also a good idea to keep some tools handy that will help you generate documents and keep you organized, such as this payroll check template.
5. Ask a Professional
Tax season can be overwhelming, especially when you have to file four times per year. It might be worth your time and money to meet with a professional accountant to review your taxes before filing.
Learn More Helpful Tax Tips Filing taxes as an independent contractor is slightly more complicated than normal, but it’s possible if you stay organized and set yourself up for success. Make sure you check out the rest of our website for more helpful tips that will help you stress less during tax season