36% of American workers are 1099 contractors. With so much of the workforce in this category, it’s common for people to have questions about contractor taxes.

Many people wonder how they file taxes or how much to take out of each paycheck. In this article, we’ll give a quick overview of contractor taxes and filing.

Who Is Considered a 1099 Contractor?

A 1099 contractor is an independent contractor, who is not employed by the company. Companies pay for their work on a contract basis.

A 1099 contractor can be an employee of a company or an independent entrepreneur. They do not qualify for the benefits and protections that come with being an employee.

The contract is an agreement between two parties. It states that one party will provide services to the other party and be compensated for it as specified in the agreement. The IRS has set out specific rules and regulations for determining if someone is a 1099 contractor or not.

How Are Contractor Taxes Different Than Payroll Taxes?

Contractor taxes are a lot different from payroll taxes. When you are a contractor, you are responsible for paying the self-employment tax. This is not the case with payroll taxes.

When it comes to income tax, payroll taxes usually have lower rates than contractor taxes. This is because payroll employers can deduct these taxes from your wages before calculating your final paychecks. Contractors must calculate and pay quarterly income taxes because the amounts are not deducted when paid.

Read here to discover what happens when a company forgets to send a 1099 MISC form.

What Expenses Can a 1099 Employee Deduct?

The expenses that a 1099 contractor can deduct are those that are directly related to their business. Some of these expenses include:

• Gasoline
• Cell phone
• Internet service
• Office supplies
• Home office space
• Software expenses when used for work
• Supplies needed for physical projects
• Advertising or marketing expenses
• If you outsource any of the work

The expenses vary based on industry. To make sure you deduct the maximum amount of expenses and get all credits you qualify for, it’s best to speak to a tax professional before filing.

Should Contractors File Taxes on Their Own?

Income from 1099 contractors is subject to federal income, state, and local taxes. The income is also taxed at the self-employment level. This means that they have to pay both halves of their social security and Medicare taxes.

It’s important for a 1099 contractor to keep track of their income, expenses, and taxes paid. This is to avoid any penalties and fees from the IRS.

Discover More Topics

Now you understand more about independent contractor taxes. We hope this article helped you learn more about how to file taxes as a contractor. While it can become complicated, with good recordkeeping filing taxes as an independent contractor won’t be too difficult.

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