Now that you just 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 how one can 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 due to this fact how a lot cash you’ll owe) in any given quarter.
The IRS recommends utilizing kind 1040-ES however you can even use a quarterly tax calculator to estimate.
Keep in mind, this quantity doesn’t need to be good. If you happen to 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 unbiased contractor, it’s a must to really make a quarterly tax fee.
You possibly can ship a verify fee together with the aforementioned Type 1040-ES by mail, or (should you’re not ninety years outdated) you may pay on-line, by cellphone, or out of your cell system utilizing the IRS2Go app.
A number of tax companies like Turbo Tax, HR Block, or your tax preparer even have quarterly choices.
Step 3: Obtain 1099-Misc varieties from shoppers (if relevant)
As soon as the tax yr involves a detailed (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 shoppers’ job to grasp who will get a 1099 kind, but when they’re not used to working with unbiased contractors, it’s possible you’ll must 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 must file a Schedule-C kind—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 at all times—utilizing a CPA or tax software program—making certain the additional data is accounted for.