With a new year underway, we wanted to give you some quick tips and ideas that you should consider as self-employed independent contractors.
- Consider hiring a tax attorney or accountant. They can give you guidance on strategies you should seriously consider — such as forming an LLC or S-Corp, and other tax advantages you should be aware of as a self-employed contractor.
- You may be subject to state tax. ADP lists all the details of state taxes in one printable PDF.
- Pay your taxes quarterly. For more information on how to do this, see IRS Form 1040-ES.
- Per diems and stipends count as taxable income.
TurboTax has a lot more detailed information about tax-saving tips for filing your 2016 taxes as a self-employed contractor:
- Expect a 1099 from your agency (LocumTenens.com).
- Open a retirement plan.
- Report self-employment business income and deductions.
- Pay a self-employment tax for Social Security and Medicare, which is figured on Schedule SSE.
- 12.4 percent contributes to Social Security and 2.9 percent contributes to Medicare (See IRS Tax Topic 554: The Self-Employment Tax).
- You can claim half of what you pay in in self-employment tax as an income tax deduction on Form 1040.
- When you are self-employed, the entire burden for paying employment taxes and prepaying estimated income tax liability is left to you. The government wants you to make payments of your estimated taxes throughout the year in quarterly installments. If you don't, you may be subject to underpayment penalties.
- Most self-employed taxpayers may be able to deduct health insurance premiums.
- Eligibility is determined each month.
- The deduction cannot exceed the earned income you collect.
- LLC members can claim the page 1 deduction.