What Tax Form Do I Use As An Independent Contractor?

Being ang independent contractor has several perks. You get to work remotely, make decisions that are aligned with your goals and needs, and have complete control over your time. You’re basically your own boss.

However, being in charge comes with responsibilities, including paying taxes. Unlike normal employees whose taxes are withheld from their paychecks, independent contractors must file and manage their tax payments. 

Find out which tax forms you need to use as an independent contractor below. 

Three Types of Taxes Independent Contractors Must Pay

Independent contractors have three types of tax liabilities:

Income Taxes

Like any other employee, independent contractors must pay income taxes. The amount you must pay depends on your total income minus any deductions you want to claim. 

Self-employment Taxes

Self-employment taxes are the equivalent of the Medicare and Social Security taxes you’d pay for as a normal employee. 

Typically, self-employment taxes are divided between the employer and the employee. However, you must pay this entire tax as an independent contractor.

As of this publication, the self-employment tax rate is 15.3%, with 12.4% for Social Security and 2.9% for Medicare. This rate can be quite a burden for self-employed workers, but the good news is you can deduct half of it from your taxable income. 

The IRS treats the employer portion of the self-employment tax as a business expense, meaning it can be tax-deductible. 

Quarterly Estimated Taxes

The US tax system follows a pay-as-you-go approach where employers withhold income taxes from an employee’s paycheck. However, since independent contractors don’t have withholding taxes, they must make quarterly estimated taxes. 

Quarterly estimated taxes cover your self-employment and income taxes for the year. You can calculate how much you owe by accurately guessing your expected total income for the year or by using the same estimated taxes you paid in the previous year. 

What Tax Form Do I Use As An Independent Contractor?

There are four tax forms independent contractors typically use when filing their taxes:

Form 1040-ES

Form 1040 is the primary form to calculate and pay your quarterly estimated taxes. You typically need your last year’s annual tax returns to complete this form. But if this is your first time paying taxes as an independent contractor, you must estimate the annual income you expect to earn. 

Before you fill out Form 1040-ES, carefully read the instruction packet that comes with it. This way, you can fill out the form properly. 

Form 1099

Every client who paid more than $600 for your service is required to send you a 1099 contractor form. It’s the counterpart of the W-2 form you would receive as an employee. 

You’ll encounter two types of Form 1099s: the Form 1099-NEC and the Form 1099-MISC. Most businesses use the former to report non-employee compensation, while the latter is used to report certain types of compensation, like prizes and awards. 

Schedule C 

This form is designed for reporting your annual income tax returns and the tax deductions you want to claim. 

Independent contractors can claim several tax deductions, from home office deductions to business insurance write-offs. The tax breaks you can claim vary depending on your type of business. 

Schedule SE

The Schedule SE form can calculate the amount of Social Security and Medicare taxes you must pay. You can use the income or loss you reported on your Schedule C as the basis for your computation.

2024 Tax Deadline For Independent Contractors

The 2024 tax deadline for independent contractors is as follows:

Quarterly Estimated Tax Deadline

You need to pay your quarterly estimated taxes on or before the following dates:

• April 15, 2024: 1st Quarter Payments
• June 17, 2024: 2nd Quarter Payments
• September 16, 2024: 3rd Quarter Payments
• January 15, 2025: 4th Quarter Payments

If the deadline falls on a weekend or a holiday, it will be moved to the next weekday. 

Income Tax Deadlines

You must file your Form 1040-ES, Schedule C, and Schedule SE forms on April 15, 2024. If you can’t file your forms on the deadline, you must file for a six-month extension using Form 4868. 

The IRS offers extensions to taxpayers who won’t be able to file their paperwork on time. However, these extensions don’t apply to tax payments. 

You still have to pay your income taxes on or before the deadline to avoid being charged a penalty. 

Should I Hire a Tax Professional?

While it’s true that you can file your taxes on your own, experts recommend independent contractors to work with a tax professional. 

Tax professionals can help take the stress out of doing your taxes. They can assist you in keeping track of your deadlines and filling out your tax forms. 

It’s very common for taxpayers to make mistakes on their forms. Although these errors can be amended, they can cause delays and hefty penalties. But with the help of a tax professional, you can guarantee your tax returns will be error-free.

They will carefully review your financial documents and tax forms to ensure accuracy. Moreover, tax professionals can give you invaluable advice on tax savings. 

They have in-depth knowledge of our tax laws and regulations. Their expertise allows them to help their clients maximize their tax deductions and find lesser-known tax credits they can qualify for.

Ultimately, your tax season will be significantly less stressful if you have a tax professional by your side. 

File Your Taxes Today

Start preparing your tax forms and contact NCH today! 

NCH offers premier tax consulting services to independent contractors in Nevada and neighboring cities. Our tax advisors will guide you in preparing and filing your tax forms, ensuring accurate tax returns. 

In addition, they can recommend tax planning strategies tailored to your needs and goals. Our tax advisors will carefully analyze your financial situation and help you devise strategies to minimize your tax burden. 

With NCH, you can enjoy a more organized and less stressful tax day. Call us at 1-800-508-1729 to schedule a consultation.    

Disclaimer: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.