Independent Contractor? No boss, but still with tax obligations.
Forgetting monthly or quarterly payments and disregarding your deductible expenses could divert you from true financial independence. Therefore, it is imperative that all types of taxpayers and especially an independent contractor keep proper control of their finances and accounts with the IRS.
Currently, there are many people who confront the inability to cover their expenses with the wages of a single job. For that reason, they complement their income by performing jobs as a self-employee, which allows them to remain employed and gain extra money through various customers. Consequently, the image of self-employee has become an increasingly popular labor scheme, no hours nor boss!
The rise of this professional work is most likely due to the lack of well paid permanent jobs. Independent contractors are individuals who provide services to employers without a permanent contract; they usually do not have an accountant, which makes it difficult for them to keep up with their tax responsibilities. The act of not having an invoice from all customers, and missing their monthly expense reports with the IRS, are common situations that sometimes become complicated for such taxpayers.
As a professional accountant, I have been able to identify a strong lack of information and familiarity with the existing mechanisms for making tax returns and payments required by the IRS. It is true that our financial lives require discipline from each individual in simple activities such as paying a credit card, reviewing household expenses, etc… It is also important to remember that your determination to increase your income, should not take away being up to date on tax and accounting issues required by the government.
Estimated Tax
It is important to remember that independent contractors have the legal responsibility to pay their taxes annually to avoid interests and penalties. Commonly, employers withhold Social Security and Medicare taxes from their employees, on the other hand, self-employees have to process Estimated Taxes and pay them quarterly. Your accountant should elaborate a detailed calculation of the taxes that you should report, and proceed to make your payment.
Take control of your financial life and avoid tax delays that may cause you severe headaches. You should include an accountant as part your budget as a freelancer and evade penalties for failure to pay your estimated taxes correctly.