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A big financial drawback of self-employment is paying self-employment taxes. These taxes are equivalent to the Medicare and Social Security taxes you’d pay as 9 Best Online Bookkeeping Services 2023 an employee. 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.
However, if you’re an independent contractor, it doesn’t work that way. Read on for an overview of how to file as an independent contractor or freelancer, so you don’t get fined or penalized this tax season when it’s time to pay your taxes. If you need help filing an independent contractor tax form, you can post your legal need on UpCounsel’s marketplace. However, any discrepancies in classification of a person as an independent contractor rather than an employee can have significant legal and financial ramifications. After you have filled out the information mentioned above, you will find a space for reporting the state income earned and your firm’s state tax identification number.
Invoices: Pay independent contractors
Once you know how much you earned, you’ll need to figure out how much you must pay in self-employment taxes. 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.
To stay on top of all your obligations for the year, download the Bench Small Business Tax Checklist. We’ll even let you know whether you need to file an NEC or MISC form for that 1099. When you fill out these forms, go line by line to ensure you are following the proper steps. Employers furnish the Form W-2 to the employee and the Social Security Administration. The Social Security Administration shares the information with the Internal Revenue Service.
Fill Out Form 1099
In some situations, you might also be required to file a tax return even if your net income was less than $400. The deadline to file 1099-NEC forms with payments to nonemployees to the IRS and your state tax authority is Jan. 31 the year after the https://simple-accounting.org/law-firm-bookkeeping-101-bench-accounting/ tax year. Put more simply, you must file all 1099-NEC forms that indicate payments to nonemployees for the 2023 tax year by Jan. 31, 2024. For other types of reported payments, such as 1099-S or 1099-B forms, the 1099 filing deadline is Feb. 15.