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As an independent contractor you are considered to be self employed or in business for yourself as a sole proprietor. At the end of the year when you file your tax return you will fill out Schedule C (Profit or Loss from Business). On Schedule C you will report your earnings from the 1099 form and you will also take credit for any deductions that you have in connection with your job as an independent contractor. This may include such things as mileage, cost of tools, office supplies, cell phone expense, home office, or any expenses you have in connection with your work. After filling out Schedule C to report your income and deductions, you will then come up with your "net income".
As a self employed person, your net income is subject to the full share of self employment taxes (social security and medicare taxes). Those two taxes combined are 15.3%. So you would also have to fill out Schedule SE to figure the amount of self employment taxes that you owe on your net income from self employment.
Your net income from Schedule C is then reported on Form 1040 along with any other income which you may have from another job or from dividends, interest, etc. You will then apply either your itemized deductions or the standard deduction and take a credit for the dependents you are claiming, to come up with your taxable income.
Since you are self employed and no taxes are being withheld from your earnings as would be the case with a regular job, then you should probably be making quarterly estimated tax payments to the IRS. If you do not make quarterly payments, then at the end of the year when tax time comes, if you have not paid in any taxes all year you may owe interest for underpayment of taxes.
To make quarterly payments, you need to estimate what you think you might owe at the end of the year, and then make payments in quarterly installments using
Form 1040-ES. Depending on what state you live in, you should also make quarterly estimated payments to your state if you live in a state where income taxes apply.
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