Tuesday, April 16, 2024

Tips on how to get impartial contractor taxes proper (and keep away from penalties)

Tips on how to pay impartial contractor taxes

Now that you just perceive a bit extra about how impartial contractor taxes work, let’s get all the way down to the tactical stuff. 

Right here’s precisely find out how to pay impartial contractor taxes.

Step 1: Estimate your quarterly tax legal responsibility

First, you must make an informed guess about how a lot cash you’ll make (and due to this fact how a lot cash you’ll owe) in any given quarter.

The IRS recommends utilizing type 1040-ES however you may as well use a quarterly tax calculator to estimate.

Keep in mind, this quantity doesn’t need to be good. When you estimate too excessive or too low one quarter, simply modify for the following quarter.

Step 2: Make estimated quarterly tax funds

When you’ve estimated your tax legal responsibility as an impartial contractor, you must truly make a quarterly tax cost.

You’ll be able to ship a verify cost together with the aforementioned Type 1040-ES by mail, or (should you’re not ninety years outdated) you possibly can pay on-line, by cellphone, or out of your cell system utilizing the IRS2Go app.

Plenty of tax companies like Turbo Tax, HR Block, or your tax preparer even have quarterly choices.

Step 3: Obtain 1099-Misc varieties from purchasers (if relevant)

As soon as the tax yr involves an in depth (Dec. 31 of any given yr), any shopper you labored with over the earlier yr ought to ship you a 1099-Misc Type to adjust to IRS requirements.

It’s your purchasers’ job to know who will get a 1099 type, but when they’re not used to working with impartial contractors, you could have to remind them.

Retailer these varieties collectively in a protected place because you’ll want them to file your taxes.

Step 4: File Schedule-C at tax time  

Lastly, when the time involves reconcile and report your tax standing to the federal government, you’ll have to file a Schedule-C type—an appendage to the normal 1040 varieties used to report earnings. 

Schedule-C experiences revenue (or loss) from a sole-proprietorship or different private enterprise. As an impartial contractor, this implies you.

File your taxes as all the time—utilizing a CPA or tax software program—making certain the additional info is accounted for.

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