For many independent contractors, tax preparation is the toughest part of the job. Without proper bookkeeping services, many independent contractors will make mistakes that cause them to pay more in taxes than they should – or perhaps even worse, to short the IRS and get into trouble after an audit.
At Equinox Business Solutions, we provide comprehensive tax and accounting services for independent contractors. Here are a few of the most common tax mistakes we see contractors make.
Interest and Non-Filing Penalties
Filing taxes on time and in full is important to avoid paying penalties and unnecessary interest payments. Just because you’re worried about liabilities or some other factor doesn’t mean you should delay filing – that will just postpone the inevitable, plus potentially make your situation worse in the meantime. The consequences can be both financial and legal, so be on top of your tax timing.
Forgetting Estimated Taxes
There are four dates that are vital for yearly taxes for independent contractors: January 15, April 15, June 15 and September 15. These are the dates by which you must file quarterly estimated taxes, and if you don’t, you could get into hot water with the IRS. There also could be situations where you aren’t required to file estimated taxes, such as a circumstance where you’re expecting a refund – only people expecting to owe at least $1,000 have to file them.
Overseen Business Deductions
With the right software, these kinds of deductions should be easily avoidable in today’s modern times. Software makes missing a deduction very difficult – programs like Quickbooks, TurboTax and others will keep you from any forgetfulness that might have gotten you in trouble in the past.
Not Solidifying Status
One of the biggest mistakes some independent contractors make is not solidifying their status with a specific work agreement in the first place. Make sure your status is spelled out as an independent contractor, not an employee, via a signed contract – this must be done before any work begins. This makes a huge difference for the type of taxes you’ll owe down the line.
For more information on avoiding common contractor mistakes, speak to the experts at Equinox Business Solutions.