Any income you earn must be reported on your tax return. If you do consulting work for three or four companies, all of them will report their earnings to the IRS. As such, you have to do your part. In addition, if you lose your Form 1099, you'll still have to file your taxes.
Consultants should be aware of the self-employment taxes levied on their income. When you're self-employed, you have to pay Social Security and Medicare taxes. When you work as an employee, your employer pays half of this amount. When you're self-employed, you're responsible for the full amount of Social Security and Medicare taxes.
These taxes are charged in addition to any income taxes you may have to pay. Most of the time, the Internal Revenue Service recommends that you make quarterly tax payments based on your estimated tax liability. Taxes are withheld like any employee, but self-employed workers who run their own businesses must manage their own taxes. You don't have to pay Social Security tax on earnings that exceed these amounts per year, but all income is subject to Medicare's self-employment tax.
As such, the IRS requires them to file and file their business taxes along with their personal income taxes. Almost everything a freelance consultant buys for their business is tax-deductible as long as it's ordinary and necessary and the cost is reasonable. To file taxes as an independent consultant, you must qualify as an independent consultant in the eyes of the Internal Revenue Service (IRS). In addition to reliable financial reporting, the CORE tax system can help you control and manage all aspects of your business taxes.
Therefore, independent consultants must take much more hands on the processes of planning, managing and paying taxes. This means that you'll add it to any other income you earned during the year and then pay taxes on that amount at your marginal tax rate. While tax collection is a painful hassle for almost all Americans, it can be particularly intimidating for independent consultants. Your share is withheld from your paychecks, but you must pay it in full when you're self-employed, although you can deduct half of your self-employment taxes from your tax liability.