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Like most employees, the taxes for an independent contractor are typically due on April 15 of each year. The independent contractor files a Form 1040, just like an employee. However, there is a ...
Estimated taxes include both federal income tax — which is organized by tax brackets that run from 10% to 37% — and self-employment tax. There’s also the matter of taxes that fund Social ...
The self-employment tax is comprised of two taxes: the Social Security tax and the Medicare tax (also known as the FICA tax). As of the tax year 2023, the FICA tax rate is 15.3% — that’s 12.4% ...
Investors and independent contractors are exceptions to withholding taxes, although they remain subject to income tax obligations and are required to make quarterly estimated tax payments. Failure to keep up with these payments can trigger backup withholding, imposing a higher tax rate of 24%.
These taxes are generally not paid by the employer on the compensation of a worker classified as an independent contractor. Instead, the contractor is responsible for their employer's share of the taxes when paying self-employment taxes at the end of the year. [2] Classification affects whether a worker can receive unemployment benefits.
The distinction between independent contractor and employee is an important one in the United States, as the costs for business owners to maintain employees are significantly higher than the costs associated with hiring independent contractors, due to federal and state requirements for employers to pay FICA (Social Security and Medicare taxes) and unemployment taxes on received income for ...
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