Independent Contractor Taxes: A Beginner’s Guide

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There was a time when you had to explain to those in the 9-to-5 world what it really means to work from the couch or hang out in loungewear all day long, that’s no longer the case.

Since the pandemic pushed so many people into working from home temporarily or permanently, the life of an independent contractor isn’t so difficult to envision now.

To be clear though, being an independent contractor is nothing like working from home when a paycheck still comes regularly and the company is taking out the taxes for you.

How you file taxes is different from what your W2 counterparts do, and that’s the most important administrative thing that sets you apart.

Whether you’re considering making the big leap into the world of freelancing or you’re already in the deep end, your tax situation doesn’t have to be that complicated.

Here’s what you need to know about paying taxes as an independent contractor.

Paying Taxes as an Independent Contractor

Before we get started, we need to stress we’re not tax professionals. This is merely general information and typically applies to sole proprietors or single-member LLCs. For business structures such as an S-Corporation or partnerships, it’s a smart idea to consult a tax professional.

Now that we got that out of the way, let’s go over one of the major differences between being a full-time employee and an independent contractor: quarterly tax payments.

Doing the paperwork to start an LLC could be your smartest first move as an independent contractor. We’ve got the details about how to set up an LLC.

Paying Estimated Quarterly Taxes

Estimated quarterly taxes is what you may give to the IRS estimating how much you’ll need to pay each year. Full-time employees have their taxes taken out with each paycheck, whereas independent contractors don’t

Basically, when you earn money as a freelancer, you name a price, you perform the service and your client pays you — without withholding any…

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