How To Keep Your Independent Contractor Taxes Organized 1. If you file your tax return on time but don’t pay the outstanding balance, the IRS will charge you a late payment penalty of 0.5% of the actual tax owed for each month that the tax remains unpaid from the due date, until the tax is paid in full. The penalty for not filing a tax return is 5% per month of the balance you owe, not to exceed 25% of the total tax due. The IRS charges penalties for paying taxes after the April 15 deadline. You can pay the tax off within three years.You prove that you don’t have the money to pay the taxes.To request installment payments using this form, there are a few conditions that must apply: If you don’t have the money to pay your taxes, you can apply for an installment agreement by completing IRS Form 9465. Inability To Pay Taxes and Penalties Involved Whichever method you decide, be sure to get your payments in on time to avoid potential penalty and interest exposure. For example, alcohol, tobacco, firearms, and telephone services are all subject to excise taxes. Excise tax: In addition to sales tax, certain products and services that you sell may also be subject to excise tax.Use tax: Depending on your state, you may have to pay use tax on items you purchase out-of-state if no sales tax was collected by the seller.Sales tax: If you sell products, you’ll need to collect sales tax from customers and remit the sales tax along with the sales tax return to your state.State and municipal tax: Independent contractors may need to pay income taxes, business taxes, registration fees, or license fees in the cities, counties, or states where they live and work. Other federal taxes include the alternative minimum tax, net investment income tax, and additional Medicare tax. Other federal tax: Independent contractors may need to pay other federal taxes depending on their particular financial situation.The tax rate is 15.3% on net earnings from self-employment up to $160,2 ($147,0) and 2.9% on net earnings above that threshold. Self-employment tax: This federal tax is how independent contractors pay into Social Security and Medicare and is calculated on Form 1040, Schedule SE.The tax rate varies from 10% to 37%, based on the level of income. Independent contractor taxes at the federal level are based on total income for the year, minus any tax deductions or tax credits. Federal income tax: This tax is reported on the Form 1040 federal tax return.List of Taxes for Independent Contractors See our comparison of W2 vs 1099 workers if you’re unsure of your employment status. The taxes in this article don’t apply to employees whose income is reported on Form W-2.
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