Be Careful with Your Taxes as a Consultant
As a consultant you can get paid in a variety of ways: standard W2 contract (client or staffing company taxes income taxes for you), 1099 (no taxes taken out, you have to take them out on your own), and corporation-to-corporation (you run your own company and your client writes a check to your company, who in turn writes a check to you).
Let’s say you go on eight different engagements throughout the year. Three W2 contracts, four 1099 contracts, and only one corp-to-corp engagement. Your taxes can suddenly become very confusing. You can easily underwithhold your taxes and end up paying huge penalties at the end of the year. Not good. You’re in this industry to make money, not hand it over to the government in penalties.
Additionally, your engagement may not have been in the same state. That can get even more confusing, and you might need state income tax help.
Imagine settling in at home for a break sometime in May or June, after you’ve done your taxes. You get a notice in the mail: you’re going to have some IRS tax audits. Uh-oh. Not good at all. You need IRS tax relief ASAP.
Of course from there you do some research online, find someone that can help you the process, and learn how to avoid the same problem next year.
Be careful with your taxes. No one wants to deal with the tax man.