As a self-employed person, it is very hard to maintain taxes. If you work with any company then the company handles all the taxes on your behalf. But this becomes a hustle for self-employed people like freelancers, self-contractors, and more. So here is a guide for Tax Preparation For Independent Contractors With Several Enterprises Or Sources Of Income. With the help of proper planning and organization, you can get through the tax-paying process very easily.
Here we will explore essential tips for independent contractors with several enterprises or income sources to tackle their tax preparation efficiently. If you are looking for similar solutions then you are at the right place.
Table of Contents
Understanding the 1099-K Tax Rate
You have to qualify 1099-k tax rate. Only the person is eligible to pay the taxes. For this, there is a specific criterion. No one will tell you if you have crossed the criteria or not. So as an independent contractor, you have to keep a record of all the criteria. The criteria for this are based on the yearly income.
The yearly income should be $20,000 or more. And there should be a minimum of 200 transactions from your bank account. Remember that the 1099-k shows the total income of a person it includes both sales tax and shipping costs too.
Keep Accurate Records
There is a self-employed tax calculator. You can use this to calculate your total income. And based on that it will show how much tax you need to pay. You have to keep accurate records of your earning for this. As a self-employed person, it is hard to keep track o your earnings. You can use AI and more to do this work for you.
If you calculate the taxes in advance then you will have time to prepare the tax money. Hence you can save yourself from an on-time hassle. You may calculate your projected tax payments precisely and on time, helping you avoid fines and interest fees, by using an estimated tax payment calculator or a quarterly tax calculator.
Benefits of using a tax calculator
A tax calculator is used to calculate taxes. And hence it helps you in knowing about the tax payment. But there are other hidden benefits of using a tax calculator. You can avoid underpaying taxes for a whole year.
If you’re a freelancer then you know that you can not get the same income throughout the year. It helps in calculating that. And when the tax session comes it helps you in paying the right amount of tax according to your income. Hence it helps you in avoiding the fines.
Take benefits of tax breaks
As a self-employed person, you can take advantage of the tax breaks that are created by IRS. For independent contractors, there are two different types of tax breaks.
- The Earned Income Tax Credit
- the Child and Dependent Care Credit
Another thing that you can do to reduce the tax is to write an expenditure that is linked to your work.
Be aware of the changes in tax legislation
There were many changes in 2018 in the tax-paying policy of the government. A lot of changes happen for self-employed persons. Like new credits and more.
You can maximize the tax savings just by keeping a record of these changes. All change sharpens every year in tax plans. So be aware of all the tax changes.
In conclusion, here is everything that you need to know about Tax Preparation For Independent Contractors With Several Enterprises Or Sources Of Income. If you are a self contractor then this is a helpful guide for you.
This will help you in saving some extra money from your tax plans. Calculating your taxes is an important part of this whole process.