The Ultimate Guide for Filing Contractor Tax [2024]

If you’re an independent contractor in the US, you are obligated by law to file contractor tax. Whether you’re a writer, a photographer, or own a large company, you won’t be able to avoid the paperwork.

But which forms exactly do you have to file, what are the deadlines, and how do you bill your clients?

If you want to find out, look no further! This article will provide you with all the information you need to file your contractor tax like a pro and show you how to generate the most important forms hassle-free with an online generator.

Let’s see what it’s all about!

What is an Independent Contractor?

Even though the IRS has certain rules for classifying independent contractors, essentially anyone who owns a business and controls the result of their work is considered an independent contractor. Some of the professions that belong to this category may include:

• Dentists
• Doctors
• Writers
• Photographers
• Graphic designers

For example, an independent contractor would be a graphic designer who works for themselves and their clients. They work out how many hours they need to put into a project, determine payment terms, and control all the other details of their collaborations with others.

In the U.S., all independent contractors are considered self-employed workers, as they have their own businesses.

Advantages and Disadvantages of Being an Independent Contractor

One of the biggest benefits of being an independent contractor is that you work on your own terms. You are your own boss, as you choose how many hours you work, what kind of work you do, and which jobs you want or don’t want to accept.

Some independent contractors can also work from home, which saves them money on commuting and time to get to and from their offices. If you’re running a larger business, you can also choose who works for you, set salaries, etc.

At the end of the day, as an independent contractor, you also get a sense of pride and accomplishment when you build a successful company.

But, as with any profession, there are also some downsides to being an independent contractor. Mainly, the biggest disadvantage is that you always run the risk of going bankrupt. You don’t have a regular salary; the income might be unpredictable, and it all boils down to how and how much you work.

Lastly, as an independent contractor, you aren’t eligible for employer-provided healthcare, meaning that you must fund your own healthcare. You must also pay both Social Security and Medicare taxes, and you’re not eligible for 401(k) plans, which are generally employer-sponsored.

How to File Contractor Tax

In the US, most independent contractors are considered limited liability companies (LLCs) or sole proprietors. If you belong to this category, you must use Schedule C (Form 1040) to report your income and earnings or Schedule E in the same form if you earn profits from any rental properties.

You are also required to submit self-employment taxes to the IRS via Form 1040-ES.

Yet, the perk of being an independent contractor is that you don’t have to pay taxes on your gross earnings. You can also reduce your overall tax obligation if you have any applicable business expenses, which are defined by the IRS as “ordinary and necessary costs incurred to operate your business." This includes payroll, rent, inventory, etc.

If your company is producing or selling products, you must also pay state sales taxes, but that mostly depends on the types of products you deal with. That’s why it’s best to check with your local tax authorities.

Important Contractor Tax Deadlines

Now that you know how to pay your contractor tax, check out the table below for some important deadlines you must meet:

Contractor Tax Forms You Must File

The two most important contractor tax forms you must file are the 1099-MISC Form and the W-9 Form. We’ll cover them in depth in the following section so that you have a clearer picture of what you can expect.

#1. 1099-MISC Form

The 1099-MISC form serves to help you note down how much income you’ve received during the year and what sort of income it was. The IRS requires you to file this form by the end of each February or by March if you choose to file electronically instead of on paper.

The form consists of 18 sections, which include your company’s information, income, insurance proceeds, withheld state tax, state income, etc.

The easiest way to file a 1099-MISC form is to fill it out digitally, download it in PDF form, and forward it to the IRS via email. For this, feel free to use our 1099-MISC form template, which allows you to effortlessly fill out the required information and send a copy of the document to the IRS.

#2. W-9 Form

Each independent contractor who is offering services to their clients also has to fill out the W-9 form. The form itself contains eight sections, in which you have to write down your business information, tax identification number, etc. You can find it on the IRS website, as well as a detailed guide on how to fill it out.

How to Adequately Bill Your Clients as an Independent Contractor

As an independent contractor, you can choose whether you want to be paid for the hours worked, by a flat fee, or even for the whole project. You can also choose among various payment methods, such as PayPal, cash, credit cards, etc.

However, one of the most important documents you have to provide your clients with if you want to bill them correctly and get paid is a contractor invoice. This document lists the exact services or products you provide, contains your company’s information, and specifies the payment terms.

If you want to easily create a contractor invoice, you can take advantage of our free invoice generator. It’s super simple to work with, as all you have to do is fill in the blank fields, download your document, and forward it to your clients.

Key Takeaways

• An independent contractor is anyone who owns a business and controls the result of their work.
• Some of the most common professions that are considered independent contractors include writers, doctors, graphic designers, etc.
• To file your contractor tax, you’ll need to file Form 1040, MISC-1099, and W-9 forms, among others.
• The easiest way to make MISC-1099 forms, invoices, and pay stubs is by using an online generator.

Final Thoughts

Although working as an independent contractor gives you more freedom, flexibility, and even significant earnings, paperwork is still a must. Filing your contractor tax might seem difficult at first, but you will soon get comfortable with it once you learn how to file the required forms.

Hopefully, this article has helped you get a grasp on the entire tax-filing process. If you need help with other paperwork, including 1099-MISC forms and pay stubs for your employees, feel free to check out what we have to offer!