Sometimes getting through a tax season is not always easy for independent contractors. An employee and an independent contractor have a lot of differences and you need to understand them. The IRS has made the difference between the two very clear. And it really relies on the arrangement that you make with the clients or companies that you work with. An independent contractor and an employee all get paid for doing a similar job. Nevertheless, differences exist between them.
Independent contractors are in control of their time. They do not have to be at an office for a specific duration as employees do. They get to work with their own timetable. They might have more flexibility and freedom compared to employees Yet this freedom is not for free. This freedom comes at the expense of catering for their health insurance and taxes.
Also what makes independent contractors different is that the deductions that they are permitted to make are more compared to that of employed people. Employees have no chance of writing off mileage. Conversely independent contractors have this privilege. In this post, you will know some of the deduction that an independent contractor can use to their benefits. To start with there is the home office deduction. This is the most ideal deduction that you are capable of taking as an independent contractor. However, you need to qualify for it. This is possible by setting aside space in your apartment or home that will serve as your working space.
The other deduction is known as a twenty percent deduction. This has been passed not so long ago. In this case twenty percent of the amount you earned in taken the money you are paid. There is a way that you can use to tell whether you have qualified or not.
It is crucial that you maintain the impeccable records. There is a small percentage that is normally audited by the IRS. However you are supposed to be well prepared in case you are asked for more information. When questions you should be in a position of giving the evidence that shows the validity of your income and expenses. It is vital that you have the relevant receipts to match your bank statements. Receipts are needed for everything.
You need to keep the receipts for all transactions that you make. A good example is maintaining a mileage book when writing off any mileage. To add to that save the documentation and receipts. This should be done for your income too. It is important that you are with a clean record income. And proving and tracking it should not be difficult.
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