Introduction
If you're an independent contractor, you'll need to know the basics of filing taxes, invoicing and getting paid. Let's take a look at some of these essential tools for every contractor:
Independent and invoicing: Essential tools every contractor should know!
So you're an independent contractor and want to file your taxes as an individual? Great! Here's what you need to know:
You'll need to report all of your income on Schedule C, which is used for sole proprietorships and partnerships (of which most small businesses are). Your business tax software should make it easy for you to enter this information.
You can only deduct expenses that were directly related to earning income or producing capital gains if those expenses are "ordinary" in nature--meaning they're typical costs incurred by similar businesses in similar industries--and they were paid during the year (or within 60 days after). If these conditions aren't met, then the deduction isn't allowed; however, some exceptions do apply in special circumstances such as casualty losses due to natural disasters or theft losses from employee dishonesty/theft committed against clients' property while working on site at their location(s).
1. What is an independent contractor?
An independent contractor is someone who performs work for a company but has no obligation to that company. They are not considered employees and therefore do not receive any benefits or protections from the government. This includes health insurance, retirement plans, unemployment insurance and workers' compensation coverage.
Independent contractors also have more flexibility in their schedules than full-time employees do; they can set their own deadlines and choose which projects they want to work on at any given time. Unlike an employee who must be at work during regular business hours Monday through Friday (and maybe even on weekends), an independent contractor can choose when he or she wants to work--as long as there's still enough time left in the day after taking care of personal tasks like laundry!
The downside? It may take some time before you start earning enough money from freelance gigs so that you're able to support yourself financially without relying on another source of income (like student loans). However if this doesn't bother you then being self-employed might be right up your alley!
2. Why should an independent contractor file taxes as an individual?
Filing taxes as an individual is a great way to keep more of your hard-earned money. As an independent contractor, you can deduct many expenses that would be considered personal if you were employed by someone else. For example, if you drive between jobs or travel for work purposes, those costs are deductible from your income tax return as business expenses. In addition to being able to deduct these types of expenses directly from your business income and save money on taxes every year (or even get refunds!), filing as an individual also gives you access to valuable benefits such as health insurance through the Affordable Care Act (ACA) marketplace and other government programs like Social Security Retirement Benefits and Unemployment Insurance Benefits
3. How do you invoice your clients?
Invoicing is the process of sending an invoice to a client. You might use invoicing software, or you could send your invoices by email or post them to your client's office. Either way, it's important that you have everything ready before sending over the finished product.
To send an invoice:
Choose a template for your document and customize it with your logo, company information and other details (if necessary). If this sounds like too much work for now, there are plenty of free templates available online - just Google "free business invoice template" and see what comes up!
Fill in all the relevant information including date; reference number(s); details of payment terms agreed with customer; description of goods/services provided; total amount due; payment method (e-cheque) if applicable; contact information so they can get hold of you if there are any questions about their statement etc., then save as PDF format so anyone can open it without needing special software programs installed on their computer system first.* If using Microsoft Office Word 2013 version 14082.* Select File > Save As... > Browse For Folder... > Type A Name For Your Document And Click OK Button To Save
4. Why are business tax software for independent contractors such a good idea?
The best business tax software for independent contractors is easy to use, saves you time and keeps you organized. It also helps you stay on top of your taxes, keep track of clients and projects, and make sure that everything is filed correctly.
An essential set of tools for every contractor, including how to file taxes correctly, how to get paid and how to invoice clients fast
You're an independent contractor, and you need to know how to file taxes correctly.
What is an independent contractor? An individual who performs services for others that are not subject to the direct control of the person or persons for whom such services are performed (see Section 7701(a)(20)).
Why should an independent contractor file taxes as an individual? In general, if you do not meet either the IRS's 20% rule or the 50% rule, then you must file your taxes as a sole proprietor or partnership--not as a corporation or LLC (i.e., C-Corp or S-Corp). This means that if your business isn't profitable yet and/or isn't generating enough revenue to cover expenses like payroll taxes and health insurance premiums, then there will likely be some personal income tax due at year end!
Conclusion
It's important to know that there are many different ways to invoice clients and file taxes as an independent contractor. We hope this article has given you some ideas on how best to achieve these goals!
