Filing taxes as an independent contractor can be challenging and complex. The following posts has some suggestions and tips to make tax time as an independent contractor easier. The question and answer format should help many taxpayers understand their tax filing obligations as independent contractors.
Best Places to File Tax Returns
Tax Question: Can I file through places like H&R Block or Dillon’s, or do I need to go to a CPA? If I have deductions, which is my best bet? What’s the most affordable? What if I don’t have enough money to pay to have my taxes done? What kind of cost am I looking at here, and when is my deadline for filing?
Tax Answer: H&R Block and other commercial services should be able to help you, as will a CPA or EA. To make their lives easier and to make your bill smaller, make sure that your records are in order and provide them with a summary of your income and expenses. Think of going to a tax preparer as getting into a taxi. Once they start working for you, the meter is running. The more prepared you are, the less time will be on the meter.
First Year Paying Taxes Question
Tax Question: This year is my first paying taxes. I was told that since that’s the case, next year I’ll have to pay quarterly, whereas this year I didn’t have to but had the option to. But what if I have no idea how much money I’ll make? For example, if I estimate I’ll make ~$10,000, but actually make only ~$3,000, how am I supposed to pay my quarterly taxes? What if I make more? I literally can’t even guess how much money I’ll make. I could get no work or lots of work.
Tax Answer: If there was no tax liability for 2012, you don’t have to pay estimates this year but all of the tax will be due on April 15, 2014 so make sure that you have enough $ set-aside to pay. For 2014, you can pay your estimates based on your earnings as they are earned at March 31, May 31, August 31 and December 31. The payments are due on the 15th of April, June, September and January. You’ll probably want your tax return preparer to work up the amounts due.
Filing Taxes as a Freelancer
Tax Question: As a freelancer, am I supposed to get forms from everyone that commissions me for work as well as people I have ongoing work with for larger amounts of money? What if I can’t get forms from some people? I thought that they don’t have to send me a form if they didn’t pay me more than $600. Does that mean I don’t have to pay it? If I still do, what if I can’t prove that I earned that money?
Tax Answer: Not every customer will give you a 1099 form. The fact that they didn’t give you one doesn’t mean that the income is exempt from tax. It isn’t. As a sole proprietor, you have the responsibility of tracking your receipts and expenses, not your customers.
Independent Contractor Tax Questions and Tips Q&A
Remember: Whether or not you can write off certain business costs depends on if they are an “ordinary and necessary” expense for someone in your line of work. In an IRS audit, you would have to demonstrate to the satisfaction of a revenue agent that you need to buy the supplies or materials in furtherance of your own business.