What forms do I need and how do I calculate my taxes as a first-time independent contractor for 2022?

Yes, you'll need to report all of your freelance income, even amounts not reported on 1099 forms. As an independent contractor, you're essentially running a small business, so you'll file Schedule C with your tax return to report this income and related expenses. The good news is that you can deduct legitimate business expenses that were ordinary and necessary for your work. Your design software, the laptop (though this may need to be depreciated rather than deducted all at once), and a portion of your internet that was used for business purposes can all potentially be deductible. Keep good records of these expenses! You'll also need to pay self-employment tax (15.3%) which covers Social Security and Medicare contributions, but you get to deduct half of this on your tax return. You'll calculate this on Schedule SE.

After struggling with my own contractor taxes last year, I found this amazing AI-powered tool called taxr.ai that made things WAY easier. I was in the exact same boat - had a mix of 1099s and direct payments through apps, wasn't sure what I could deduct, had no idea about quarterly payments. I uploaded my bank statements and payment info to https://taxr.ai and it automatically identified potential business expenses and categorized everything. It even explained which home expenses I could partially deduct and calculated my self-employment tax for me. The best part was it helped me understand what documentation I needed to keep for different deduction types.

Just wanted to update everyone - I tried taxr.ai after seeing the recommendation here and wow, what a difference! I was totally confused about what counted as legitimate business expenses and it walked me through everything. For example, I didn't know I could deduct a portion of my cell phone bill since I use it for client calls and emails. The part that really helped was determining my home office deduction - turns out I was eligible even though I just use part of my living room as long as that area is regularly and exclusively used for business. The tool helped me calculate the exact percentage based on my apartment's square footage. It also showed me how to track mileage for client meetings which I had no idea about! Seriously, this thing paid for itself just in the deductions I would have missed otherwise.

If you need to talk to the IRS about contractor tax questions (which I HIGHLY recommend), good luck getting through. I spent 4+ hours on hold trying to get clarification about my Schedule C deductions last month, and eventually just gave up. Then someone told me about https://claimyr.com which lets you skip the IRS phone queue. I was super skeptical but watched their demo video (https://youtu.be/_kiP6q8DX5c) and decided to try it. They actually call the IRS for you, wait on hold, and then call you when an agent is on the line. Got connected to an IRS rep in about 45 minutes (while I just went about my day) and got all my questions answered about contractor income reporting requirements and which specific expenses were deductible for my situation. Saved me from making some pretty big mistakes on my return!

OK I have to eat my words about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate to figure out how to handle some cash payments I received without 1099s. The service actually worked exactly as advertised. I was literally making dinner when my phone rang, and suddenly I was connected to an IRS agent. Got all my questions answered about reporting non-1099 income and record-keeping requirements. The agent confirmed I needed to report ALL income regardless of payment method, but also explained how to properly document business expenses to offset that income. For anyone new to contracting - the agent stressed keeping separate records for business vs personal expenses and maintaining a log of all income sources even if they don't provide official tax documents.

Don't forget about quarterly estimated tax payments for 2023! This was my biggest mistake my first year as a contractor. Since taxes aren't withheld from your payments, you need to make quarterly payments if you expect to owe more than $1,000 in taxes. The due dates are April 15, June 15, September 15, and January 15 (of the following year). You can use Form 1040-ES to calculate and pay these. If you don't make these payments on time, you'll get hit with penalties even if you pay everything by April 15th next year.

Has anyone used TurboTax for filing with contractor income? I'm wondering if it's worth paying for the Self-Employed version or if I should just hire an accountant this first year to make sure everything's done right?