Tips on how to pay unbiased contractor taxes
Now that you simply perceive a bit extra about how unbiased contractor taxes work, let’s get all the way 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, it’s a must to 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 too use a quarterly tax calculator to estimate.
Keep in mind, this quantity doesn’t must be good. In the event you estimate too excessive or too low one quarter, simply alter for the subsequent quarter.
Step 2: Make estimated quarterly tax funds
When you’ve estimated your tax legal responsibility as an unbiased contractor, it’s a must to truly make a quarterly tax fee.
You may ship a examine fee together with the aforementioned Type 1040-ES by mail, or (in case you’re not ninety years outdated) you’ll be able to pay on-line, by telephone, or out of your cell system utilizing the IRS2Go app.
A lot of tax providers 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 consumer 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 grasp who will get a 1099 type, but when they’re not used to working with unbiased contractors, it’s possible you’ll have to remind them.
Retailer these varieties collectively in a secure 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 varieties used to report revenue.
A Schedule-C stories revenue (or loss) from a sole-proprietorship or different private enterprise. As an unbiased contractor, this implies you.
File your taxes as all the time—utilizing a CPA or tax software program—making certain the additional data is accounted for.