Being an independent contractor comes with many benefits like having higher hourly wages, flexibility in when you work, and choosing who you work with. Even with the vast benefits of contract work, many people are deterred from the world of contracting due to the notoriously complex tax regulations. So, how can you legally avoid heavy contract work taxes while still reaping the massive benefits of being an independent worker?
In today’s blog, we will cover the typical expectations for contract work taxes, how they’re different from employment taxes, and how partnering with a staffing firm like ITAC Solutions can make an independent contractor’s life easier.
What the Typical Expectations Are for Contract Work Taxes
Before diving into how to avoid the hassle of filing taxes as a contractor, let’s break down how contract work taxes typically function and the tax expectations for contractors.
The IRS considers independent contractors as self-employed individuals, which means they are subject to a different set of tax payment and filing rules than someone an organization employs. For example, when you are an independent contractor, the IRS requires you to:
- File Form 1040 if your net earnings from self-employment are over $400.
- File a Schedule C form to calculate net income or loss for your business.
- Pay a self-employment tax to cover the amount you owe for Social Security and Medicare.
- Make estimated quarterly tax payments if you expect to owe $1,000 or more in taxes when filing your annual return.
- File tax deductions for various business expenses like equipment, office rent, legal fees, etc.
Additionally, independent contractors are also expected to pay quarterly taxes at the state level. Failure to complete any of the above requirements may result in tax penalties and fees.
Staffing Firms Can Take the Burden of Taxes Off Your Plate
The easiest way to avoid the complexities of filing taxes as an independent contractor is to partner with a staffing firm. When staffing firms like ITAC Solutions employ individuals for open contract opportunities, it is standard to place contractors as W2 employees under the staffing firm. By doing this, the staffing firm can handle all the responsibilities of any traditional employer, including:
- Withholding taxes.
- Contributing to unemployment accounts.
- Covering employment-related insurance such as workers’ compensation and liability insurance which typically is unavailable to those who choose to work in a 1099 arrangement.
Other Benefits of Working with Staffing Firms
When working with a staffing firm as an independent contractor, the firm handling your taxes isn’t the only benefit you can reap. Other common benefits can include:
- Health insurance
- Dental and vision coverage
- If an issue arises, you have a dedicated representative to assist
- The firm will find job opportunities for you
Partnering with a staffing firm is a win-win-win situation for the contractor, employer, and staffing firm. As an independent contractor, you’ll still have the freedom of independent work but none of the hassle. The employer finds a qualified professional to help them with their projects. And the staffing firm can find successful partnerships for its clients and candidates.
ITAC Solutions Is Looking for New Contractors
If you are an independent contractor looking for your next opportunity or are someone considering getting into the world of contracting, contact our team at ITAC Solutions today. We can place you as a W2 employee so you can avoid the hassle of contract work taxes from now on.
ITAC Solutions is a premier staffing firm that helps professionals in the Information Technology, Accounting & Finance, Corporate Services, and Government industries find consistent contract work. You can also view our open contract opportunities by clicking here.