There are a lot of benefits that come with a role as an independent contractor. You can often make your own hours and decide which projects you take on and which you turn down. This ability to be your own boss, to not have an employer, comes with a high level of independence but with this freedom comes certain obligations.
One of the more complex of which involves taxes.
Three important things for contractors to know about their taxes
Independent contractors are generally responsible for managing their federal taxes. The government expects you to take on the role that your employer would have played. This means that you will likely need to file additional tax forms and are responsible for meeting your tax obligations.
The government will also likely expect you to make estimated tax payments on a quarterly basis. This is because the federal government expects regular payments — not just one big payment at the end of the year. In order to meet this obligation, the government generally expects contractors to pay a portion of their taxes in four different increments, often due April 15, June 15, September 15, and January 15 of the tax year.
You may also need to pay a self-employment tax. The Internal Revenue Service (IRS) views this tax as a way for the self-employed to cover Medicare and Social Security tax obligations.
The Tax Code is a complicated beast. If you made a mistake or the IRS claims you made a mistake, know that you are not alone. Navigating the details of these laws is not easy. An attorney experienced in the niche area of tax law for contractors can review any correspondence from the IRS and help explain what is going on, better ensuring you have the information you need to deal with the problem before it escalates.