Independent Contractor or Not?
The IRS has strict definitions to determine whether or not a worker is an employee or independent worker. An independent contractor typically makes investments that support a business beyond any specific job. The investment of a true independent contractor might, for example, further the business’s capacity to expand, reduce its cost structure, or extend the reach of the independent contractor’s market.
You can use payroll services to handle the paperwork more quickly. All you need do is add the contractors to your account and email them the link. If a worker independent contractor accountant controls those, it means that they are an independent worker. However, if you are still unsure of the class of a worker, you can submit Form SS-8 to the IRS.
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The good news is that while you need to pay the entire 15.3% tax, you can take half of what you pay as a deduction from your income. Our partners cannot pay us to guarantee favorable reviews of their products or services. Even Quickbooks requires you to use TurboTax for an extra fee if you want your taxes done in the same place. It is the most expensive service on this list, but includes everything you need to run your basic business administration without lifting a finger. To avoid these penalties, adhere to federal regulations and visit your state DOL site to learn the laws applicable to your business.
Additionally, some local jurisdictions may impose their own taxes on the income of self-employed individuals. To ensure compliance, consult with local tax authorities or a tax professional familiar with your area’s regulations. As an independent contractor, you can lower your taxable income through deductions. This includes not only the direct costs of your work, like equipment and supplies, but also indirect expenses that contribute to your business operations. Figuring out exactly how much you owe in taxes can be challenging—especially if you’re new to working as an independent contractor.
Why Use an Accounting Contract
As an independent accountant you might work from home, going out to see clients as and when you need to. Even if you have your own office or share office space, there will be times you can choose to work from home. You’ll have to pay for all of your future training and development yourself, although certain work-related education is, of course, tax deductible.
- You are still expected to estimate and pay any taxes you owe by the original April 15th deadline.
- Such a person is in charge of how they perform their duties, and they are not obliged to work for the company on an ongoing basis.
- It’s crucial to research and understand your specific state’s tax code as it pertains to self-employment.
- This influences which products we write about and where and how the product appears on a page.
- We do so by utilizing technology to its fullest capabilities, taking time to understand and analyze a business’s needs, long-term goals, and objectives to personalize each and every interaction.
- But that’s only an extension to file your paperwork — if you owe any taxes, you’ll need to pay them by the April 15 deadline to avoid being charged a penalty.
- Remember that as an independent contractor, you’ll have to set aside all of your self-employment taxes, Social Security, and Medicare contributions yourself.
By hiring independent contractors, an employer enjoys the greater ease and flexibility to expand and contract the workforce as demand rises and falls. An independent contractor’s work is typically not integral to an employer’s business for an extended period. We’ll continue with the same scenario to estimate your federal income taxes. And let’s assume you’re single, have no other income and claim the standard deduction. For simplicity, we will ignore certain tax credits and deductions, such as the Qualified Business Income deduction.
Pros of Being an Independent Accountant
If you did more than $600 of work for a particular client, they’re required to file Form 1099-MISC and send you a copy of it. 1099-MISC is an “information filing form” used to report non-salary income to the IRS. You don’t need to do anything to your copy of 1099-MISC, but if you don’t receive one, you should follow up with your client. 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.