Tax Tips: Independent Contractors in Colorado
Working as an independent contractor has many great benefits and often results in keeping more of the money you earn, but it's important to understand the requirements! We're here to help you smoothly navigate the process.
Form W-2 vs. Form 1099-NEC - What's the difference?
The most important difference is that as a 1099 independent contractor, no taxes are withheld from your paycheck. Therefore you are responsible to pay these taxes. Depending on how much you earn, taxes may need to be paid annually, or quarterly.
Use this calculator to estimate your tax obligation and how much money you should be setting aside each month. This calculator does not take into account things like earned income credit, dependents, or tax deductible expenses, therefore your results may differ.When you file your taxes, be sure to deduct allowed expenses such as: mileage/transportation expenses, materials, training/certification costs, etc.
If you earned more than $600 in the calendar year, we will issue out a Form 1099-NEC by January 31st. If you are expecting to owe over $1,000 in federal taxes and over $1,000 in CO state taxes, you must make quarterly estimated tax payments to prevent an underpayment penalty.
Estimated Quarterly Payments
Keep in mind that quarterly estimated payments are due on the following dates:
- April 15 for income earned January 1 - March 31 (Q1)
- June 15 for income earned April 1 - May 31 (Q2)
- September 15 for income earned June 1 - August 31 (Q3)
- January 15 of the following year for income earned September 1 - December 31 (Q4)
Again, failing to make these payments on time can result in various penalties, so mark these dates on your calendar!
Make Colorado State Quarterly Payments here: https://tax.colorado.gov/individual-income-tax-estimated-payments