As an independent contractor, one of the biggest questions you may have is whether or not you`ll be responsible for paying your own taxes. The answer, unfortunately, is yes – as an independent contractor, you`ll be responsible for paying all of your own taxes, including both income and self-employment taxes.
This is because when you work as an independent contractor, you`re not considered an employee of the company or organization you`re working for. Instead, you`re considered self-employed, which means you`re responsible for managing your own taxes and other financial obligations.
What Taxes Will You Need to Pay?
As an independent contractor, you`ll be responsible for paying both income and self-employment taxes.
Income Taxes: Income taxes are taxes that are levied on your earnings from working as an independent contractor. The amount that you`ll owe will depend on your total income for the year, and is calculated based on a sliding scale.
Self-Employment Taxes: In addition to income taxes, you`ll also be responsible for paying self-employment taxes. These taxes are designed to fund social security and medicare, and are calculated as a percentage of your net income.
How to Manage Your Taxes
While managing your own taxes as an independent contractor can be challenging, there are a few things you can do to make the process easier:
1. Keep Track of Your Earnings: One of the most important things you can do as an independent contractor is to keep careful track of your earnings throughout the year. This will help ensure that you know exactly how much you owe in taxes, and will make it easier to file your taxes accurately and on time.
2. Set Money Aside for Taxes: Another important step is to set money aside for taxes throughout the year. Since you won`t have taxes withheld from your paycheck, it`s up to you to make sure you have enough money set aside to cover your tax obligations.
3. Work with a Tax Professional: Finally, it`s a good idea to work with a tax professional who can help you navigate the complex tax landscape as an independent contractor. A tax professional can help ensure that you`re meeting all of your tax obligations, and can help you find ways to reduce your tax burden.
As an independent contractor, it`s important to understand that you`ll be responsible for paying your own taxes. While this can be a challenge, there are steps you can take to make the process easier, such as keeping track of your earnings, setting money aside for taxes, and working with a tax professional. By staying on top of your tax obligations, you can ensure that you`re in good financial standing and can focus on growing your business.