Taxes Made Simple

Mark (independent contractor/Cutco sales rep) asks:

Hi Mike. I'm a college student, and I work part-time as a Cutco sales rep in an independent contractor role. What tax forms do independent contractors have to fill out? Am I going to need to hire an accountant this year? In other years my Dad has helped me to file my tax returns.

Answer:

Hi Mark. First, I just want to let you know (if you haven't figured it out yet) that you work for a great company.

There are a few different forms you'll have to fill out this year that you haven't seen before: Schedule C, Schedule SE, and possibly a Form 4562 or 1040-ES. Don't worry though, you should be able to manage on your own. As an aside, anything called a "Schedule" is simply an attachment to a "Form."

Schedule C: This piece of paperwork, an attachment to your regular Form 1040, details the revenues and expenses from your business. It's fairly straight-forward, as most of your expenses will fall very clearly into one of the categories given.

Schedule SE: Another attachment to your Form 1040, this is where your Self-Employment tax gets calculated. For more information about the Self-Employment tax, take a look at this sample chapter from my tax guide for independent contractors. After completing your Schedule C, Schedule SE is very easy and will probably take you only a few minutes.

Form 4562: If you purchased some equipment (a PDA/Blackberry for instance) for use in your business, this is the form that you'll be using to determine how much you can deduct. This form is easily the most complicated of the ones here, so if you think you're going to be using it, be sure to save plenty of time to work on it.

Form 1040-ES: If you're going to have to make estimated tax payments, this is the form you'll use to calculate how much to send in. (Generally, the amount you send in each quarter is simply equal to 1/4 of the total tax you paid last year.)

If it'd be helpful, feel free to take advantage of these downloadable tax forms for independent contractors and sole proprietors.

Best of luck with your sales!

For More Information, Take a Look at My Related Book.

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