by Angela M. Wheeland
Consultants who assignment apart accept acquittal from companies not as advisers but as absolute contractors. The Internal Revenue Service considers absolute contractors as sole proprietors and small-business owners. Even if you don’t accede yourself a small-business owner, you charge book your taxes as one, which requires you to book added forms with your taxes.
Any being who earns added than $600 from one business in a year will accept a 1099-MISC from the aggregation that remits the payment. Businesses use Form 1099-MISC to address assorted assets or non-employee compensation. Box 3 or Box 7 will account the payments you accustomed throughout the year, depending on the blazon of assignment you performed. Assets taxes, Social Security taxes and Medicare taxes are about not withheld on non-employee payments, so it is your albatross to pay taxes on these payments, which is why you charge book a small-business tax return.
Because you’re an absolute architect and your payer doesn’t abstain assets taxes, you are amenable for advantageous the self-employment tax. Self-employment tax includes your allocation and the employer’s allocation of the Social Security and Medicare tax. The IRS allows you to address off the employer-equivalent allocation of the tax as an acclimation to your taxable income.
Independent contractors charge complete Form 1040 back advertisement assets from a 1099-MISC. Form 1040-EZ and 1040A don’t accommodate fields for you to address business income. In addition, you charge complete Schedule C, which letters your assets and expenses. After you decrease your assets from your expenses, you access at your net assets or net loss, which you address in the “Business Assets or Loss” band in the “Income” area on Form 1040. To account your self-employment tax, you charge complete Schedule SE. Enter your absolute tax in the “Self-Employment Tax” band in the “Other Taxes” area on Form 1040. Address the employer-equivalent allocation in the band labeled “Deductible Part of the Self-Employment Tax” in the “Adjusted Gross Income” section.
Small-business owners who apprehend to owe added than $1,000 in taxes at the end of the year are appropriate to pay estimated taxes. The IRS uses estimated tax to pay your self-employment tax and tax on your income. To appraisal your taxes, you charge complete Form 1040-ES and accomplish estimated payments by April 15, June 15, Sept. 15 and Jan. 15 of anniversary year. Anniversary acquittal consists of division of the taxes due for the year. If you or your apron has a allowance job that withholds taxes, you can abstain accepting to pay estimated taxes by denial an added bulk to awning the tax.
Angela M. Wheeland specializes in capacity accompanying to taxation, technology, gaming and bent law. She has contributed to several websites and serves as the advance agreeable editor for a construction-related website. Wheeland holds an Associate of Arts in accounting and bent justice. She has endemic and operated her own assets tax-preparation business back 2006.
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