In the current economy, the amount of those employed as independent contractors is at an all time high. With companies downsizing and making cutbacks left and right, it’s no surprise that many individuals have gone into work for themselves. With an independent contractor status, there are many things that differ from being employed. The number one thing is that being contractor supplies you with a freelance tax plan rather than one you would be supplied with if you worked for a company. With this new form of income tax, there are often a number of freelance tax questions that go along with it.
Freelance workers must abide by a completely different set of rules than those who are employed by a company. Those who have worked for others all of their life may find themselves lost when it comes to the world of freelance tax. Luckily, the experts at Levy & Associates are able to answer all freelance tax questions and make the transition from employee to independent contractor as simple as possible. Offering help from a variety of tax experts, Levy & Associates can help independent contractors make the most of self-employment and show them all there is to know about the world of freelance tax.
What’s the Difference Between a Freelance and Employee?
The best way to explain the difference between a freelance tax payer and an employee is the manner in which the work is done. An employee is directly supervised by a company, while an independent contractor is paid for the labor alone. Think of the independent contractor as the mercenary of the workforce.
How Much Money Results in Having to Pay Freelance Tax?
Those who make less than $600 for an individual company may not necessarily have to pay freelance tax as the company doesn’t need to report these earnings to the IRS. Once a person begins exceeding that number, they are required to send a 1099 for their work.
What Kind of Freelance Tax Deductions Can One Claim?
Freelancers are able to deduct anything used for their business. Office supplies, rent, computers, anything that goes into running the business can be deducted. However, it’s important to not only remember to save receipts, but to hire experts that can help you maximize your return. Many individuals who file freelance tax deductions by themselves may find that they aren’t getting as much money back as they could. Levy & Associates have the necessary tools to yield a proper freelance tax return.
How Do I File Freelance Tax?
The most common way to file freelance tax is to use a 1040 form. Independent contractors are generally considered a sole proprietor of the business and this form allows you to fill out an EZ form if your expenses were not more than $2500. Again, it is best to hire experts to help ensure that the process is done correctly and to answer your freelance tax questions.
Are Income and Social Security Taxes the Only Freelance Taxes I need to Worry About?
In addition to income and social security taxes, independent contractors may also be responsible for other forms of freelance tax. Those who have made $400 or more may have to pay a self-employment tax or other taxes depending on their location. Levy Associates can help clearly define which freelance tax you are responsible for and ways to minimize the amount you will need to pay for running a business.