I am an independent contractor - how do I pay my taxes?
Question from Allison
October 23, 2008 at 9:32am
I have just been hired by a very small company in which all of the employees are technically Independent Contractors.
Fresh out of college, I've never had to do my own taxes. Now I have to figure out how to get NJstate and Federal taxes taken out of my paycheck.
I was told that the taxes can be done online and the taxes could be taken straight out of my bank account on a quarterly basis. Each time I try to search online the proper way to go about this, I am overwhelmed with information and unable to get done what obviously needs to get done.
Can anybody help me with the online sites to go to and the steps to go about this?
Answer: Allison - You are either an employee of a company or you are an independent contractor. In this case you are indicating that the company says you are independent contractor - in other words self-employed. You are responsible for your paying
your own federal and state income taxes as well as the Self-employment tax which is the Social Security and Medicare tax for self-employed individuals that is similar to what an employer withholds for their employees.
You will be required to report your income and expenses on the Schedule C, Profit or Loss from Business or C-EZ. Profit from Business (Form 1040). Since you don't have an employer who withholds and pays your tax you may be required to make estimated tax payments. You can e-Pay your estimated tax payments using the Electronic Federal Tax Payment System or EFTPS. This allows you to schedule and make your payments either over the phone or on the internet and they will automatically be withdrawn from your account.
You will want to visit the Self-employed Individuals Tax Center http://www.irs.gov/businesses/small/article/0,,id=115045,00.html on our website that will provide details about e-file and e-pay, recordingkeeping, as well as determining your estimated tax and choosing a tax preparer.
You will also want to contact your state taxing authority for information about how to pay the state income tax.Source: blog.oregonlive.com