What Independent Contractors Should Know About Filing Taxes
As an independent contractor, you can get to enjoy the pros and cons of ‘freedom’. For one, you serve yourself and everything that you do is yours. When you are contracted for whatever it is that you can provide, you know that the work you put in is going to see you paid fairly. When you work for a firm, you work for the wage. When you are a contractor, you work for your future – and as much of the profit as you can get.
However, like many other industries, filing taxes as an independent contractor can be a significant challenge.
While your best bet to make sure you have smart and sound taxation is to hire a CPA, a bit of understanding goes a long way. For example, an independent contractor isn’t just someone who does manual labor work. Everyone from a doctor and a dentist to a lawyer and an accountant can all be ICs. This means that you have full control over the job being done, and don’t just follow the instructions.
However, this does mean that you are self-employed and thus you need to be ready to follow a different platform for managing your taxes. For example, most people will find that their taxes become easier to manage if they bring in help – especially in the first couple of years. If you are used to employee-based taxation then this can feel like a whole new, much more complex, world to tackle.
Not sure what bracket you fall under? Then file a Tax Form SS-8 to the Government. This will give you a better idea of what you are to the government, and how they are going to come back to you in the near future about your tax status.
As ever, though, you should be ready to fill out a Schedule C, a Form 1099-MISC, a Schedule SE and a Form 1040-ES. All of these need to be filled out on the most part for most contractors, and working with a CPA can help you to make sure you are making the right calls from this perspective.
It can be tough to get it right, and something that you will spend more than a fair amount of time juggling with. Be sure to look to bring in professional help if you are even slightly unsure – tax challenges should always be dealt with swiftly and with professional aid!