What tax forms do I need when hiring independent contractors?

tax form for independent contractor

Most self-employed individuals, including freelancers and sole proprietors, are required to pay estimated taxes quarterly and file a tax return annually. You can learn more about who should pay quarterly taxes on the IRS’s estimated taxes info tax form for independent contractor page. You’ve assembled all your documents and filled out all your forms. The IRS explains all your filing options, including a list of IRS-approved electronic filing options, such as tax software companies like TurboTax and H&R Block.

Car and Truck Expenses

We recommend consulting with an accountant or tax advisor who can help you calculate deductions and help you in the event of an audit. Alternatively, tax-filing software includes instructions and information on how exactly to calculate your specific business deductions. Bear in mind that you need to make completely accurate deduction calculations—an educated guess isn’t good enough for the IRS.

  • The Internal Revenue Service requires that by January 31 companies report accrued payments of $600 and above made to contractors within the previous year.
  • The office space must be regularly and exclusively used for business.
  • Form 1099-NEC should be completed at the end of the year and sent to independent contractors at their correct addresses.
  • Lea holds a Juris Doctor and holds both a Bachelor of Science and a Bachelor of Arts from each institution respectively.
  • In other words, any income you’re generating from your side hustle or independent contractor work that’s different from compensation for your services.
  • You might find one that fits the bill in our roundup of the leading business expense tracker apps.

Use Form 1040-ES to calculate and make IRS estimated tax payments. Whereas employers can have significant control over their employees’ work processes, a business cannot dictate how and what its independent contractors do to achieve the business’s desired result. Being an independent contractor makes doing your own taxes more difficult, but it’s not impossible.

Tax forms for independent contractors: Form 1099-MISC

It’s the client’s duty, as someone who is contracting work, to send the contractor Form W-9 before the end of the financial year. If discrepancies are found in any 1099-NEC forms, the business owner should follow the IRS directions to refile the form as soon as possible with the “corrected” box checked. The W-9 should be completed by contractors at the start of their working relationship with a company. Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor and no one factor stands alone in making this determination.

  • And even if you make quarterly payments, you’ll still need to file your annual tax return like everyone else on April 15 (April 18 in 2023 because of a holiday).
  • You’ll need the 1099-NEC form to calculate tax debts and help the IRS track tax expectations.
  • Independent contractors who are sole proprietors report taxes on Form 1040, Schedule C. Tax returns are due on April 15 or October 15, if an extension is filed.
  • However, you need to pay attention to the procedures involved in paying independent contractors for work completed.
  • Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor.

Calculating payments for independent contractors is easy since there are no withholding taxes. A contractor who bills per hour will need to report the hours they’ve worked down to the minutes spent, alongside the service performed. Payments are then made according to how many hours are spent performing the tasks. At your disposal are the same deductions available to any small business. You can scan our guide to small business tax deductions for a more comprehensive list of deductible expenses, but here are a few call-outs for independent contractors. Additionally, since independent contractors are business owners, they can take tax deductions for expenses incurred to complete their work, just like any other business can.

More In File

If you’re working with many contractors, consider making payments via a payroll app or software that helps with contractor payments. You can link the platform to your funded account and create accounts with your contractor information. Information such as their full name, worker ID, payment rate and payment dates are stored for easier payment delivery.

If the concept of “independent contractor taxes” is new to you, we encourage you to read on. Business owners are also responsible for providing independent contractors with a copy of Form 1099-NEC by Jan. 31 of the year following payment. The Form 1096 deadline is Jan. 31 when summarizing 1099-NEC forms reporting non-employee compensation. Due dates may vary for other types of informational filings, so it’s important to check each year when creating your tax reporting calendar. The company preparing the 1099 forms would also prepare Form 1096. This form should be completed and submitted with the company’s informational returns when they are filed in paper form.

Schedule C is used to report your net income from self-employment. There may be other IRS forms you’ll need to file, depending on the deductions https://www.bookstime.com/articles/net-terms you take. To complete your taxes, you’ll need to gather all your forms and use them to complete certain forms on your return.