If you created a single-member LLC, you should register for an EIN to avoid sharing your Social Security Number (SSN) or individual taxpayer identification number (ITIN) with clients. The U.S. government has been cracking down on independent contractor classification in cases where workers could be treated more like employees. There are a number of business deductions you can take as an independent contractor, including health insurance, home office deductions, mileage and deductions for your phone bill. Keeper is the top-rated all-in-one business expense tracker, tax filing service, and personal accountant. A benefit of being an employee is that there is likely an HR and Payroll department that ensures all of your requisite tax is paid. Whether all of your income comes from independent contracting or just a portion of it, it’ll be up to you to hold on to your paperwork.
They should send it to each contractor and file a copy with the IRS. Let’s say during the year you earn $40,000 as an independent contractor from working with two companies. These are your only jobs and you’re not an employee anywhere else. You should receive a 1099-MISC from each company confirming how much they paid you during the year.
Backup Withholding and Nonresident Alien Withholding
Most independent contractors pay a 15.3% self-employment tax in addition to federal income tax, as well as state and local taxes, depending on where they reside. The overall tax rate for independent contractors will vary based on their tax bracket. Independent contractors need to make quarterly estimated tax payments if they expect a tax bill of at least $1,000 for the year. Well, quarterly tax payments are due on a schedule set by the IRS.
There are different independent contractor classification rules in California. The party responsible for payment, reimbursements or providing the basic equipment and supplies to perform the work is also a key determinant tax forms for independent contractors in worker classification. Although these forms are called information returns, they serve different functions. For assistance with your individual tax return, refer to the “Help” tab on the IRS.gov home page.
Payroll, compensation, pension & benefits
Source Income of Foreign Persons, must be filed if the payer is required to file Form 1042-S. A Form 1042-S is required even if the tax was not actually withheld. For more information on withholding on payments to nonresident aliens, see NRA Withholding, Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, and Publication 901, U.S. The Information Returns Intake System (IRIS) Taxpayer Portal is a system that provides a no cost online method for taxpayers to electronically file Form 1099 series.
