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Collect and Keep Your Records and Receipts During the Year Maintaining accurate records is essential for effectively monitoring one's income, deducting eligible expenses, and fulfilling tax obligations. It is advisable to retain receipts for all expenses incurred, as this can potentially reduce the overall tax liability through the deduction of qualifying expenses. Additionally, it is crucial to record any earnings derived from gig work and sales. It is noted that all income must be reported on the tax return, irrespective of whether or not one receives Forms 1099 from the respective paying entities. |
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Pay Estimated Tax If an individual earns income from gig work as an independent contractor, it is necessary to make quarterly estimated tax payments in order to comply with tax regulations. Failure to do so may result in penalties, therefore it is important to ensure that sufficient tax is paid in a timely manner. However, if an individual works as an employee and also engages in gig work on the side, it may be possible to avoid making estimated tax payments on the income earned from gig work by adjusting the amount of tax withheld from the employee paycheck. The Tax Withholding Estimator can be used to determine the appropriate amount to withhold. Subsequently, a new Form W-4, Employee’s Withholding Certificate should be completed and submitted to the employer. The due dates for estimated tax payments occur four times a year, specifically on April 15, June 15, September 15, and January 15. To calculate the estimated taxes owed, individuals can utilize either Form 1040-ES, Estimated Taxes for Individuals or Form 1040-ES (NR), U.S. Estimated Tax for Non-resident Alien Individuals. |
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Get Ready to File You can expect to receive copies of the forms by January 31. These forms may encompass Form 1099-K, which pertains to payment card and third-party network transactions, Form 1099-MISC, which pertains to miscellaneous income, Form W-2, which pertains to wage and income statements, and Form 1099-NEC, which pertains to nonemployee compensation. |
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File Your Tax Return To file your tax return as an independent contractor (self-employed), you should fill out these forms: Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Tax Return for Seniors; Schedule SE (Form 1040), which pertains to self-employment tax; and Schedule C (Form 1040), which pertains to the calculation of profit or loss from a sole proprietorship business. |
Disclaimer All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage. |