Tax season may have passed for this year, but it’s never too late to start thinking about next year. If you’re like most people, you probably prefer not to think about your taxes until you’re required. Yet, taxes are important, and this is especially true for independent contractors.
Sometimes it’s hard to know whether you’re an employee or an independent contractor. If you wonder if you’re self-employed, the IRS considers you an independent contractor if you have only have control over the process of your work but not the end result of the work itself. The IRS will likely consider you an employee of the company paying you if it dictates what work you do and how you do it.
What being an independent contractor means for your taxes
As an independent contractor, the IRS requires to you to file a Schedule C form to file your annual tax return. A Schedule C a form for self-employed individuals to report their income or losses for a certain year. Think of a Schedule C like a 1040 form that you may have previously filed as a traditional employee.
There are certain circumstances in which the IRS allows you to fill out a Schedule C-EZ instead of a regular Schedule C. You may fill out a Schedule C-EZ if you:
- Had less than $5,000 in business expenses that year.
- Your business posted a net profit.
- Had no employees throughout the year.
There are more requirements for determining Schedule C-EZ eligibility, but these are a few that should make you wonder if you have eligibility. The Schedule C-EZ could simplify your tax filing process.
Clarify your employee status
While no one wants to think of doing their taxes, getting a head start can make the process easier by preparing you for what to expect. However, to properly file your taxes, you must establish which type of employee your employer should classify you as.