If you’re a consultant, freelancer or independent contractor, your taxes likely are more complicated than the taxes of someone who works for a single employer and has money automatically withheld from each bi-weekly paycheck. Here is a quick tax tip to help you avoid penalties and maximize tax deductions.
If you are paid as an independent contractor instead of an employee of a corporation, you may have some tax payments to make during the year and some extra tax reporting to do at the end of the year. Being self-employed has its exceptional perks like setting your own work schedule and working on the projects you choose, even if you only do it on the side. As an independent contractor you will receive a 1099 at the end of the year and what some people might not know that is different from a typical situation is that self-employed individuals need to report and pay taxes quarterly. Quarterly estimated payments are the equivalent of taxes withheld from regular, W-2 employees. Thus, you need to make sure to set aside funds to enable you to make quarterly estimated tax payments and avoid penalties and interest that can add up and dodge having to make a huge tax payment at the end of the year. These quarterly payments should be made to the IRS and your State taxing agency on April 15th, June 17th, September 16th, 2019 and January 15, 2020. Figuring the taxes due can be complicated but if you know your tax bracket (or effective tax rate) it can be computed quickly.
June 17th is around the corner, so if this speaks to you, feel free to contact us with any questions.