If you are an independent contractor, you must pay very close attention to your taxes. The last thing that you want is to get in trouble with the IRS. Here are four tax tips for independent contractors.
Do not forget to report all of your earnings
As an independent contractor, you are obligated to report all of your income to the IRS. According to the law, independent contractors who earn $600 or more must fill out a 1099-MISC form. Although you may be tempted to exclude small jobs, make it a priority to be as honest as possible. If your income raises a red flag, you can look forward to receiving a letter fro the IRS.
Pay estimated taxes
Due to the fact that you are an independent contractor, you are responsible for paying self-employment taxes. While working for yourself has many advantages, you are still not exempt from paying taxes. In fact, most independent contractors are required to pay estimated taxes at least four times a year. If you are confused about how the estimated tax system works, be sure to consult a tax professional. Reputable accounting services in Miami will be more than happy to guide you through the process.
Keep up with all of your receipts
Receipts are very important financial documents. Fortunately, receipts can actually decrease the amount of money that you owe to the IRS. Each year, thousands of taxpayers fail to store their receipts in a safe location. Never make the mistake of throwing a precious receipt into the garbage. When it comes time to file your taxes, even small purchases can make a big difference.
Always separate personal and business expenses
Personal and business expenses should always remain separate from each other. Some of the most common business expenses include advertising, telephone service, business-related meals, legal fees, union dues, and office equipment. You can also receive a deduction for your traveling expenses. In order to receive a deduction for a home office, the room must be used only for business purposes.
Independent contractors certainly have a lot of freedom. However, their taxes should remain a top priority.