There are several reasons why some tax seasons are worse than the past ones. The Tax Cuts and Jobs Act left taxpayers confused about the many changes they made to the tax code; this is one of the reasons. A large number of taxpayers who usually get and rely on tax refunds did not receive them as they virtually disappeared; this is the second reason. It is much more confusing to people who are self-employed. Getting through this tax season as an independent contractor may be of concern to you.
What you should understand during tax season is the difference between independent contractors and employees. The distinction between the two is made, and it usually depends on the arrangement that you have with clients or firms that you are working with. There are some differences under the surface even though employees and independent contractors may be paid the same for the same job. Unlike employees, independent contractors do not have to be in the office from nine to five since they have control over their time.
More flexibility and freedom is what independent contractors have than employees, but they have to pay their own taxes and health insurance. Independent contractors also pay the same amount of taxes regardless of the cash they have made. One of the strategies is taking all of your deductions possible into account. Another difference between employees and independent contractors is that you will have the chance of taking many more deductions when you are independent. It is not possible for employees to write off mileage. Home office deductions ad expenses related to your business are some of the deductions that you can make if you are an independent contractor.
You should also keep impeccable records if you want to own tax season as an independent contractor. A small percentage of taxpayers are audited by the relevant authorities, but you should be prepared in case you are audited, or more information is wanted. You will be required to have proof of your income and your expenses in you are asked any questions. Both bank statements and receipts for everything are needed as proof. You should keep a mileage book and save the documentation and receipts if you plan on writing off transportation costs or car mileage.
In order for it to be easily tracked and proved, you will want to have a clean record of your income. Another thing that will enable you to own tax season as independent contractor is not being afraid to ask for help. As an independent contractor, you may find it hard to pay taxes because you may have questions on the deductions to be made and the ones not to be made. Asking for help is crucial instead of assuming anything.