Independent contractors play a vital role in the economy, accounting for nearly 7% of all employment. There are thousands of independent contractors doing business in the Sacramento and Roseville regions – and many likely have questions about tax compliance, business accounting, and financial planning. If you are one of them, look to Cook CPA Group for guidance and support. Serving Roseville and Sacramento, we have over 20 years of experience providing accounting and tax preparation services for independent contractors in California.
Am I a Contractor or Employee for Tax Purposes?
If you are already certain that you are an independent contractor, you may wish to review the next section about IRS tax requirements. Otherwise, this information will help you determine how you should be classified for tax purposes.
Workers are categorized as “employees” or “contractors” when filing and paying taxes. There are different tax requirements for each type of worker, which also impact their employers.
If, for instance, you are an employee, your employer should take care of withholding federal income taxes and employment taxes from your earnings. Employment taxes include the Social Security tax, the Medicare tax, and, for some taxpayers, the Additional Medicare Tax. However, if you are independent contractor, you must calculate and pay these taxes on your own, which is known as the Self-Employment tax or SE tax. To determine self-employment earnings that are subject to the SE tax, contractors normally use Schedule C (Form 1040) (Profit or Loss from Business).
Our CPAs for independent contractors can help determine whether you should be classified as an employee or contractor for tax purposes. Additionally, you may file Form SS-8 with the Internal Revenue Service for clarification, which has a self-explanatory title: “Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.”
IRS Tax Filing Requirements for Independent Contractors
The first tax form you will complete as an independent contractor is generally Form W-9 (Request for Taxpayer Identification Number and Certification). However, you should not submit this form to the IRS. Instead, you will provide your completed Form W-9 to the business entity, which will use your W-9 to obtain information about you and complete your Form 1099-MISC (Miscellaneous Income).
To file taxes as an independent contractor, you should obtain Form 1099-MISC, which you should have received no later than January 31 of the year after the year you were paid. For example, if you receive payment for your services during 2018, you should receive your Form 1099-MISC no later than January 31, 2019.
Independent contractors have unique tax filing requirements, being required to report self-employment income. To quote the IRS on an important point, “There is no minimum amount that a taxpayer may exclude from gross income,” contrary to the widespread myth that income below $600 need not be reported. Even if you earned less than $600 in self-employment income by working as an independent contractor, you are still required to report your earnings. To report self-employment earnings as an independent contractor, you must file an income tax return, otherwise known as Form 1040, using Schedule C to calculate your earnings.
If you failed to file a tax return, failed to pay taxes, need tax debt relief because you are having difficulty paying your tax bill, or forgot to include some of your self-employment income on a previous tax return, you should speak with an experienced tax accountant for independent contractors to begin reviewing your options. Our accountants can also help you identify tax credits and tax deductions for independent contractors that you may be eligible for, such as tax deductions for business expenses.
Business and Tax Accountants for Contractors in Sacramento and Roseville, CA
If you are an independent contractor in Sacramento or Roseville, turn to the experienced CPAs and tax preparers of Cook CPA Group for efficient accounting and bookkeeping services tailored to your business needs. We work with independent contractors in all types of industries, including but not limited to agriculture, construction, hospitality, law, manufacturing, mining, oil, and gas, the equine industry, the livestock industry, the veterinary industry, and the brewing and distilling industry.
Whether you need to prepare for an audit, have questions about tax preparation and planning, want to learn about credits and deductions, are interested in signing up for QuickBooks training, or need help with another tax matter, Cook CPA Group provides a wide range of bookkeeping and tax accounting services for contractors in Roseville and Sacramento.