If you need IRS tax relief when it comes to the unpleasant chore of filing as an independent contractor, you are not alone. This category of tax law is poorly understood by many people, and results in a very busy month of April for professional tax preparers.
There are several criteria that the IRS uses to determine if someone is an independent contractor. The main consideration is whether or not the taxpayer received a W2 form from an employer. In cases where a 1099 was issued instead of a W2, the IRS by default considers that person an independent contractor.
Independent workers pay the entire Social Security tax burden, which is normally shared between employer and employee. If you work for yourself, you have to pay both sides of the bill. The only saving grace to the Schedule C, which is the form you will use to file as an independent contractor, is the business expense section. There, you will achieve a bit of IRS tax relief by deducting your annual business expenses from business income. The IRS is keen on documentation for this category, so make sure you maintain adequate records throughout the year.
After filling out the Schedule C and including it with your personal tax return, you are all through. The process sounds much simpler than it is because many small businesses are quite complicated enterprises. Perhaps your expense category included depreciation or a loss due to property damage. In these and many other situations, you may seek IRS tax relief from a professional in order to file correctly. The last thing you need is for the IRS to audit your Schedule C and disallow some of the large deductions.
The typical types of businesses that fall under the independent contractor category include just about anything that is done at home, unless the employer provides a W2 form for the work. Childcare, freelance writing, personal services, and even tax preparation are standard types of contract jobs.
For IRS tax relief regarding filing as an independent contractor this year, it is best to consult a tax professional. That way, you will know that you are filing under the correct category and are taking the largest, legally allowable deductions for your specific situation. Independent contractor filings can be tricky and usually require at least a bit of outside help, so be sure you find help early on to avoid the rush.