Working as an independent contractor or freelancer is a great way to gain financial independence and freedom over your schedule. And more people are doing it than ever before.<\/p>\n
In fact, more than 35 percent<\/a> of the workforce does at least some freelance or contract work each year.<\/p>\n Freelance and contract work can be rewarding, but there are challenges unique to self-employment that you won\u2019t have to worry about with a traditional job. The toughest challenge is taking care of taxes each year.<\/p>\n Here are a few things you need to know about filing taxes as an independent contractor so you can keep your business safe from the IRS.<\/p>\n When you work as a traditional employee, you only have to make tax payments once each year. However, when you\u2019re filing taxes as an independent contractor, you\u2019ll need to pay more often.<\/p>\n The IRS expects you to make quarterly estimated tax payments every year. The estimate comes from what you expect to make from your freelance work throughout the year. Even the most seasoned freelancers have to guess at this number.<\/p>\n When in doubt, overestimate. The more you pay in quarterly taxes, the less you\u2019ll owe come Tax Day.<\/p>\n If you think you\u2019re off the hook just because you also have a full or part-time job, you\u2019re not. \u00a0You\u2019ll need to make the quarterly payments on the freelance income you earn every year that you\u2019re working as an independent contractor.<\/p>\n Though many freelancers and independent contractors get paid through direct deposit, some still receive cash under the table. If you\u2019re one of them, you know that it\u2019s tempting to hide those cash payments from the IRS.<\/p>\n Don\u2019t. Doing so can get you in serious trouble if you get audited.<\/p>\n Get in the habit of reporting all income earned during the year. Include everything from investment income, money earned from your regular job, and any income from your freelance or contract work.<\/p>\n Remember, most businesses that hire contract employees will report the amount they paid you to the IRS and will send you a 1099-MISC form to make filing your taxes easier. That form creates a paper trail and makes it easy for the IRS to tell if you\u2019re paying enough in taxes at the end of the year.<\/p>\n Even if your employer doesn\u2019t send you a 1099-MISC form, report the income you earned from the work you performed anyway.<\/p>\n It\u2019s rare for freelance and contract workers to have consistent incomes every year. Unfortunately, the amount that your earnings fluctuate can make predicting your tax liability difficult.<\/p>\n Be ready for changing tax payments every year and do your best to estimate what you\u2019ll owe accurately. The IRS lets you base your calculations on your previous year\u2019s earnings.<\/p>\n Think about how much you expect to earn over the course of the year. Remember, you\u2019re responsible for paying the full 15.3 percent self-employment tax rate on top of the taxes owed in your tax bracket.<\/p>\n Determine your tax bracket by looking at your total estimated earnings from every income source you have. Then, base the quarterly payments on that amount. If your income is likely to go down over the year, adjust your payment amounts accordingly.<\/p>\n One of the most important tax tips for independent contractors that you need to remember is that you\u2019re responsible for withholding tax payments. When you work for a traditional employer, they withhold a portion of your paycheck for your taxes every two weeks.<\/p>\n When you\u2019re a freelance or contract worker, you\u2019re working for yourself. This means it\u2019s up to you to withhold money from each paycheck or payment you receive.<\/p>\n If you\u2019re not sure how to keep yourself from spending the money you receive, be proactive. Set up a savings account and automatically transfer your estimated quarterly payment amounts from your bank account as needed. This will keep the money out of sight and makes it less accessible to you on a daily basis.<\/p>\n There are many different deductions you\u2019ll be able to qualify for when filing self-employed taxes. You just need to be able to prove that you qualify for those deductions when you file your taxes.<\/p>\n This means you\u2019ll want to keep copies of your receipts, business expenses, and anything else you have that might help lower your tax liability each year. There\u2019s no such thing as too much documentation when it comes to getting the deductions you deserve.<\/p>\n It\u2019s also a good idea to keep copies of those records for several years after you file taxes. This way, you\u2019ll have everything you need to show the IRS if you get audited.<\/p>\n As a self-employed independent contractor or freelancer, you\u2019re constantly worried about keeping your business profitable. You may not have time to prepare your taxes or may struggle to remember when your quarterly payments are due.<\/p>\n Unfortunately, this can lead to a serious penalty for not filing 1099<\/a> taxes on time.<\/p>\n Instead of trying to do everything yourself, consider working with an accountant. They\u2019ll help you stay on track and can even make sure you\u2019re taking the maximum number of deductions that you can.<\/p>\n You may end up saving more on your taxes than you spend working with the accountant over the course of the year.<\/p>\n As a freelance worker, you\u2019re no stranger to hard work and long hours. Filing taxes as an independent contractor will take time and it\u2019s not something you can put off until the last minute.<\/p>\n You need to stay on top of your quarterly payments and make sure you\u2019re paying enough each quarter to reduce your risk of audits or penalties. As long as you take your time and do what you can to be as accurate as possible, you\u2019ll be in good shape.<\/p>\n Looking for more tips to help you better streamline the tax filing process? Check out our latest posts.<\/p>\n","protected":false},"excerpt":{"rendered":" Working as an independent contractor or freelancer is a great way to gain financial independence and freedom over your schedule. And more people are doing it than ever before. In… Continue reading “6 Things to Know About Filing Taxes as an Independent Contractor”<\/span> <\/span><\/a><\/span><\/p>\n","protected":false},"author":2,"featured_media":21777,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[5],"tags":[],"_links":{"self":[{"href":"https:\/\/upgifs.com\/blog\/wp-json\/wp\/v2\/posts\/21776"}],"collection":[{"href":"https:\/\/upgifs.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/upgifs.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/upgifs.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/upgifs.com\/blog\/wp-json\/wp\/v2\/comments?post=21776"}],"version-history":[{"count":1,"href":"https:\/\/upgifs.com\/blog\/wp-json\/wp\/v2\/posts\/21776\/revisions"}],"predecessor-version":[{"id":21808,"href":"https:\/\/upgifs.com\/blog\/wp-json\/wp\/v2\/posts\/21776\/revisions\/21808"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/upgifs.com\/blog\/wp-json\/wp\/v2\/media\/21777"}],"wp:attachment":[{"href":"https:\/\/upgifs.com\/blog\/wp-json\/wp\/v2\/media?parent=21776"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/upgifs.com\/blog\/wp-json\/wp\/v2\/categories?post=21776"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/upgifs.com\/blog\/wp-json\/wp\/v2\/tags?post=21776"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}1. You\u2019ll Need to Pay Quarterly<\/h2>\n
2. You\u2019re Required to Report All Income Earned<\/h2>\n
3. The Amount You Pay Can Vary From Year to Year<\/h2>\n
4. Taxes Aren\u2019t Withheld Automatically<\/h2>\n
5. When in Doubt, Document Everything<\/h2>\n
6. Working With an Accountant Is Best<\/h2>\n
Filing Taxes as an Independent Contractor Takes Work<\/h2>\n