I strongly recommend that you talk to an accountant right away because
you could save some money by making a tax payment by January 15, 2014.
You will receive Forms 1099-MISC from the various entities with whom you are doing business as a contractor detailing how much money they paid you. A copy will go to the IRS also.
You file a Schedule C with your Form 1040 in which you detail how much you received on the 1099-MISC forms as well as any other income that your
contracting business received (e.g. amounts less than $600 for which
a 1099-MISc does not need to be issued, or tips, say, if you are a
taxi-driver running your own cab), and you can deduct various expenses
that you incurred in generating this income, including tools, books,
(or gasoline!) etc that you bought for doing the job.
You will need to file a Schedule SE that will compute how much you owe in
Social Security and Medicare taxes on the net income on Schedule C. You will pay
at twice the rate that employees pay because you get to pay not only the
employee's share but also the employer's share. At least, you will not have
to pay income tax on the employer's share.
Your net income on Schedule C will transfer onto Form 1040 where you will
compute how much income tax you owe, and then add on the Social Security
tax etc to compute a final amount of tax to be paid. You will have to pay
a penalty for not making tax payments every quarter during 2013, plus
interest on the tax paid late. Send the IRS a check for the total.
If you talk to an accountant right away, he/she will likely be able
to come up with a rough estimate of what you might owe, and sending in
that amount by January 15 will save some money. The accountant can also
help you set up for the 2014 tax year during which you could make
quarterly payments of estimated tax for 2014 and avoid the penalties
and interest referred to above.
