Tax for Independent Contractors
As an independent contractor, you are your whole business. You work in every department. You are your boss, your employee, your marketer, and your accountant.You call the shots on scheduling and paving your career path. Wearing so many hats can be exciting, but it can also get messy and leave opportunity for important tasks like filing taxes to go overlooked, or done carelessly. Unlike an employee who has their taxes taken out for them, it's your job as an independent contractor to figure out all the deductibles you are eligible for when filing your taxes. Wouldn’t it be easier to hire a CPA firm that offers tax services for independent contractors?
As a self-employed contractor, you don’t pay taxes on the dollar you earn, but rather you pay taxes on the amount you earn after subtracting out the cost of running your business. You can claim many different deductions through an IRS form which all self-employed people fill out called a 1099. These 1099 independent contractor deductions lower the amount you’ll ultimately have to pay in taxes, and they fall into five easy-to-follow categories.
Depending on your profession, you might have significant expenses associated with your home office. If your home office is a place that is only used for work, and it is your primary place of business, there are multiple options for calculating your independent contractor tax deductions. There are direct expenses to consider, like renovations and a paint job, as well as indirect expenses, like insurance, utilities (this includes cell phone and wifi costs if they are applicable to your situation), property taxes, and home repairs related to your business. Likewise, some independent contractors refer to their car as “their office” since they spend so much time there, going from job to job. Car expenses and mileage can be one of the largest tax write-offs for these independent contractors.
In today’s world, there is more value in continuing education within entrepreneurship. While coursework and supplies can be expensive, your educational expenses are likely tax-deductible. Things like webinars, books, subscriptions, or software costs are all included as potential 1099 deductibles.
Depreciation of Property and Equipment
It’s likely that as an independent contractor, you’ve purchased property and equipment for your business. Over time, those items start to lose their value. This is called depreciation. The depreciation of items purchased for business use can be written off on your 1099 tax return.
When it comes to business trips, your airfare and hotel costs can be written off as business expenses. Likewise, cost of shipping items to trade shows or conferences you are attending for business purposes can also be deducted.
Insurance is important for every business owner to have. Two insurance plans that can be deducted on your 1099 are health insurance and contractor’s insurance. For health insurance, this includes insurance premiums, expenses such as glasses, nonprescription medications, and visits to the doctor. Auto insurance and any other type of personal insurance is not able to be deducted, however.
Independent Contractor Tax Services
There are lots of benefits to being an independent contractor. You call all the shots and make your business everything you can dream of. Leave your taxes to the experts at Chandler and Knowles tax accountants.