Sunday, December 3, 2023

Learn how to get unbiased contractor taxes proper (and keep away from penalties)

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

Right here’s precisely the way to pay unbiased 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 subsequently how a lot cash you’ll owe) in any given quarter.

The IRS recommends utilizing type 1040-ES however you can even use a quarterly tax calculator to estimate.

Keep in mind, this quantity doesn’t must be good. If you happen to estimate too excessive or too low one quarter, simply modify for the subsequent quarter.

Step 2: Make estimated quarterly tax funds

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

You’ll be able to ship a test fee together with the aforementioned Type 1040-ES by mail, or (if you happen to’re not ninety years previous) you possibly can pay on-line, by telephone, or out of your cellular machine 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 kinds from purchasers (if relevant)

As soon as the tax 12 months involves an in depth (Dec. 31 of any given 12 months), any consumer you labored with over the earlier 12 months ought to ship you a 1099-Misc Type to adjust to IRS requirements.

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

Retailer these kinds 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 standard 1040 kinds used to report revenue. 

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

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

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