But every contractor is different, so one of the other accounting apps on our list may fit your needs better. Features include invoicing, expenses, time tracking, projects, estimates, payments, reporting, and a mobile app. While some other advanced programs feel like they require an accounting degree to navigate, FreshBooks keeps it simple. We reviewed accounting apps on a variety of platforms, for mobile devices and desktop computers alike, so you can assess which features meet your needs as an independent contractor.
Our team will file your tax return based on your books, records and any additional information you provide. Our tax professionals decipher between all of your expenses and determine what tax is deductible or not. We then combine all of your information and prepare all necessary forms and schedules. Independent contractors are typically required to file an annual tax return using Schedule C or Schedule C-EZ, which details your income and deductible expenses. However, if you need more time, you can file for an extension using Form 4868, which provides an additional six months to file (until October 15th). Remember that an extension only applies to filing the return, not paying any taxes owed, so make sure to estimate and pay any tax liability by the original deadline.
Using Schedule SE, you calculate that you owe self-employment taxes of $5,914. Half of this tax that you pay ($2,957) is taken as a deduction on Page 1 of your Form 1040. As an independent contractor, you are responsible for your own retirement savings.
In that event, the lawyer may not communicate with the accountant about the matters involved in the lawsuit without the consent of the accountant’s counsel. Peena works with our clients to provide them support in the day to day operations of their business. Her extensive background in payroll, bookkeeping and management makes her an invaluable resource for clients to utilize. It is important to consult a qualified tax professional or accountant to ensure you adhere to the latest tax regulations and take advantage of any tax-saving opportunities specific to your situation.
States also regulate how to pay independent contractors and impose penalties for noncompliance with regulations. For instance, Virginia imposes up to $1,000 on a company’s first default and as much as $5,000 on subsequent offenses. The employer is also barred from specific government contracts for up to a year for the first time and two years for subsequent offenses. Now that you’ve completed your Schedule C and Schedule SE, you have the income and deduction information you need to finish filing your 1040 personal tax return.
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But as an employee, your employer covers half the cost of the taxes. As a self-employed person, you’re required to pay the entire tax yourself. You must pay federal income tax, which varies depending on how much you earn. Like most countries, the US has a progressive income tax rate of between 10% (for income up to $10,275) and 37% (for income over $539,901). If you need help calculating your estimated payments, use IRS Form 1040-ES, try our income tax calculator or speak with a tax professional to get a more dialed-in estimate of what you might owe.
These are your only jobs and you’re not an employee anywhere else. You should receive a 1099-MISC from each company confirming how much they paid you during the year. Instead of a W-2, as an independent contractor, you’ll receive a 1099-MISC. You can use that information https://www.bookstime.com/ to double-check that you’re reporting all of your income earned through the year. There are a number of business deductions you can take as an independent contractor, including health insurance, home office deductions, mileage and deductions for your phone bill.
You won’t know exactly how much tax you owe until you file your personal tax return at the end of the year. But you’ll want to spend time estimating this because if you underpay your estimated taxes, you could be subject to penalties. How you report the income you earn as an independent contractor is different than how you’d report it as an employee. As an independent contractor, you’re required to file Schedule C along with your personal tax return.
Accurate accounting for independent contractors can be complicated. Income and expense records are essential for individuals operating as businesses to report and pay quarterly estimated taxes. Omitting expense deductibles on estimated tax forms accountant for independent contractors each quarter is common among independent contractors, which can easily result in overpayments. Although it is possible to recoup the payment in excess when filing your federal income tax return, you should reserve that cash for other use.