Like most Michigan residents, you might not be looking forward to filing taxes. However, with the end of the year fast approaching, it is time to start thinking about gathering your paperwork and anticipating receiving your tax forms in the mail. At the law office of Rebeck & Allen, we know that this is especially true for independent contractors. In fact, you will likely need to think about your taxes numerous times throughout the year, rather than only during tax filing season.
As the Houston Chronicle explains, independent contractors are responsible for handling most of the tax matters that traditional employees take for granted. For example, you do not automatically have Social Security taxes and Medicare taken out of your paycheck – you pay them yourself with self-employment taxes. Additionally, you may pay your taxes quarterly – in April, June, September and January – instead of only once a year. Many independent contractors find this method of paying taxes easier and less overwhelming than paying a big chunk during tax season.
Other tax tips that you, as an independent contractor, may find helpful include the following:
- Keep receipts and records of all employment-related expenses and transactions.
- Save a percentage of your income in an account designated solely for taxes, or use software to help you calculate your estimated tax payments.
- Be aware that you can take advantage of numerous self-employment deductions, including those for work-related travel expenses, hotel and meal costs, your home office, Internet and phone service and professional fees, such as accountant and legal services.
Doing your taxes when you are self-employed may seem complicated but need not be a nightmare when you are organized and know what to expect. Our website explains more about tax planning and common mistakes that independent contractors make.