Filing Taxes as an Independent Contractor

 Posted on August 13, 2015 in Employment Taxes

One of the challenges that independent contractors who work for themselves have is to file taxes accurately. Typically an independent contractor may be required to file taxes using a 1099-MISC form. In other cases, they file taxes using a 1099-K form. The bottom line is however, is that if you are earning an income as an independent contractor, you will have to file taxes.

However, it can become confusing to classify the kind of work that you do. Tax filing for an independent contractor may not be as cut and dry, as filing for taxes when you are an employee of a company. For instance, how do you classify the kind of work that you do? Is it a business, or are you engaged in a hobby, that occasionally earns you an income?

Filing properly is very important because it determines the kind of tax that you pay, and the exemptions and deductions that are deducted. For example, if you earn an income via a hobby that you are currently engaged in, you may be able to use deductions to offset the income, but those deductions cannot be higher than your income, because there is no concept of suffering a loss in a hobby. Things can be dramatically different when you're engaged in a business, however. Businesses do involve profit and loss, and in fact, in the early stages of a business, it's fairly normal to not be making any profit at all.

These are confusing issues, and for guidance about how to file taxes accurately when you're an independent contractor, get in touch with a tax lawyer.