Now that you simply 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 learn how to pay unbiased contractor taxes.

Step 1: Estimate your quarterly tax legal responsibility

First, it’s important 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 type 1040-ES however you too can use a quarterly tax calculator to estimate.

Bear in mind, this quantity doesn’t need to be good. In case you estimate too excessive or too low one quarter, simply alter for the subsequent quarter.

Step 2: Make estimated quarterly tax funds

When you’ve estimated your tax legal responsibility as an unbiased contractor, it’s important to truly make a quarterly tax fee.

You may ship a test fee together with the aforementioned Type 1040-ES by mail, or (for those who’re not ninety years outdated) you possibly can pay on-line, by telephone, or out of your cellular machine utilizing the IRS2Go app.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 types from purchasers (if relevant)

As soon as the tax 12 months involves a detailed (Dec. 31 of any given 12 months), any consumer you labored with over the earlier 12 months ought to ship you a 1099-Misc Type to adjust to IRS requirements.

It’s your purchasers’ job to know who will get a 1099 type, but when they’re not used to working with unbiased contractors, you might must remind them.

Retailer these types 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 type—an appendage to the standard 1040 types used to report earnings. 

A Schedule-C reviews revenue (or loss) from a sole-proprietorship or different private enterprise. As an unbiased contractor, this implies you.

File your taxes as all the time—utilizing a CPA or tax software program—making certain the additional data is accounted for.