How A 1099 Employee Can Manage Their Earning And Their Taxes
The American workplace has evolved over the time, and there are majority of individuals who are working from home. It is not only individuals who own businesses that will be working from home but even the companies are now outsourcing their services to the freelancers. Companies which hire freelancers for their tasks will benefit as they do not have to pay the freelancers benefits as it is the case with the regular workers and they also do not have to pay for their office space, while the freelancer, on the other hand, will also benefit from having the freedom to control their schedule. One challenge that comes with freelancing is filing taxes, and while you are among the 10.6 million Americans that work from home, you have the task of filing your taxes. Unlike in the in-house employment where the employer will withhold the taxes, short-term employees and freelancers are responsible for their taxes.
1099 forms are particularly used by IRS as a means of tracking individual’s income, where individuals who earn interest will have to fill out 1099-INT form, as individuals earning individuals fill the 1099-DIV form. When you get cash from the retirement fund, it is also part of 1099 income but for individuals who do not have a regular job they are considered by IRS as independent contractors. Such individuals will include the freelancers, short-term employees as well as self-employed individuals and they are all required to fill out a 1099 misc form.
Individuals who are working as conventional workers by being employed by the various companies may have an easier time when they need to submit their deductions, as the employer will submit their state and federal taxes as well as social security. Transition to a freelancer from a regular employee may excite individuals, but it doesn’t exempt them from taxes. Don’t wait until the end of the year to find a lump sum amount of cash and pay as your taxes for the year, but it is advisable that you save 30 % of every paycheck to have an easier time paying taxes.
Unlike the case of W-2 employees who might have an easier time to handle taxes, the case is complex on the side of freelancers and other 1099 employees. One can, however, seek help of experts when they need to file taxes to avoid missing out on deductions that can save them some cash and at the same time help them avoid tax debts that will attract penalties.
As a freelancer you do not enjoy the same benefits that workers enjoy, as they will have life insurance, healthcare, and retirement benefits, but yourself you will have to find plans which can work and benefit you.