Tips for filing taxes as an independent contractor or employee
Filing taxes can be a daunting task. We’re here to help! If you recently changed employment status or are unsure of how to prepare for filing your taxes, this article is for you. We’ve put together some quick tips to make your tax preparation easier – whether you’re filing as an independent contractor or an employee.
Tax Preparation Tips
Below you’ll find the information and documents you need to prepare your tax filing.
I’m a 1099 contractor
What you need:
Personal information: You will need to share the basics including a home address, date of birth, and your Social Security number.
Tax forms:
Your employer will provide a Form 1099, which is used to report one source of income.
Your employer may also request for you to fill out a Form W-9, which provides details about your Taxpayer Identification Number and Certification.
Depending on your circumstances, you may need to submit various tax forms, such as Schedule C (Form 1040), which is used to report self-employed income and expenses.
Previous returns: You will need a copy of the previous year’s federal and state tax returns.
Income records: This includes all invoices, receipts, and other records of payment received from clients or other sources of income.
Expense records: This includes receipts, invoices, and other records of all business expenses, such as office supplies, equipment, transportation costs, and any other expenses related to your freelance work.
Bank statements: You may need to provide information from your bank statements to support your income and expense records.
Calculate self-employment income: You need to calculate your self-employment income by adding up all your earnings as a freelancer and subtracting any related business expenses.
I’m a W2 employee
What you need:
Personal information: You will need to share the basics including a home address, date of birth, and your Social Security number.
W-2 Form: This form is provided by your employer and shows your total earnings for the year, as well as the amount of federal, state, and city taxes withheld.
Pay stubs: You should keep a record of all your pay stubs throughout the year to ensure that the information on your W-2 form is accurate.
Calculate deductions: If you have any deductions, such as mortgage interest or charitable donations, you'll need documentation to support these claims.
Proof of health insurance: If you have health insurance coverage through your employer or through a marketplace, you may need to provide proof of coverage when you file your taxes.
Stay ahead
It’s not too early to start preparing for next year. Below are some tips on how to stay on top of your taxes throughout the year to make filing even easier next year.
Keep track of all income: Keep a record of all the income you received from clients and other sources throughout the year.
Keep receipts and expenses: Keep receipts and records of all your business expenses, such as office supplies, equipment, and transportation costs.
Calculate self-employment tax: Freelancers are responsible for paying self-employment tax, which includes Social Security and Medicare taxes. It is good practice to calculate this regularly and save accordingly throughout the year.
Financial Technology: Consider using software like Intuit QuickBooks to keep financial records during the year. This is also helpful for invoicing and accounts receivable.
Know the tax deadlines: Be aware of the tax deadlines, which are usually in April, and make sure you file and pay your taxes on time to avoid any penalties.
Important note: tax laws and regulations change regularly. It’s important to stay up to date with the latest information and consult with a tax professional if you have any questions or concerns.
If you have questions about taxes as a meeting or event professional, we’d love to answer them for you. Reach out to our team to schedule a chat and learn more about the compliance and services we offer our Soundings Thrive community.