Bookkeeping for Independent Contractors Tips to Keep in Mind

Above all, establishing accuracy and order in your organization is the biggest advantage of using accounting software. The first step for many brand-new small business owners is to enter all of their bookkeeping data onto an Excel spreadsheet. Excel data entry requires manual effort, which increases the likelihood of human error. To manage your books, the software will automatically import your invoices, payments received, payments returned, and expenses.

• We make sure that every client is served by the expertise of our whole firm.
• Join over 1 million businesses scanning & organizing receipts, creating expense reports, and more—with Shoeboxed.
• Independent contractors typically also must make quarterly estimated tax payments throughout the year.
• Even Quickbooks requires you to use TurboTax for an extra fee if you want your taxes done in the same place.
• As a business, you will need to pay taxes and keep up with your bookkeeping as well.
• If you’re self-employed, you’re not required to hire a bookkeeper or an accountant.

It is advantageous to have everything separated in the event of an audit, especially if you consider yourself to be a business. If your claims are contested, you can support your records with various accounts. We offer a broad range of business services such as entity formation, strategic planning, cash flow management & CFO-on-the-go services. A Bookkeeping Independent Contractor Agreement is a contract between the bookkeeper and a client to provide financial services. It sets forth the bookkeeper’s obligations, client expectations, and the bookkeeper’s payment. It also sets forth protections and confidentiality provisions for the client.

Best Accounting Apps for Independent Contractors

If your part-time business generates more than 1,000 invoices a year, you’ll need to upgrade. But even the Standard version, priced at just $15 per month billed annually, which offers up to 5,000 invoices a year should be enough for most part-timers. Proper bookkeeping will help you set up financial reports that let your plan and make educated decisions for the future. Note that not all income is taxable, and some forms of income may be taxed differently. It is important to consult with a tax professional or the IRS to understand your tax obligations and ensure that you accurately report all taxable income. As mentioned before, most of the popular bookkeeping and accounting software on the market has built-in features for maintaining records built in, which makes this process much easier.

• Without reliable data, you may not be able to make the best decisions for your business.
• Keeping track of your expenses will help you identify which ones are tax-deductible, and you can claim them on your tax returns.
• Regular pay, withholding of taxes from that pay, and the creation of an employee’s schedule by their employer are all benefits of employment.
• Riverside’s $400 profit posted when they billed the Joneses on March 20.
• But that’s only an extension to file your paperwork — if you owe any taxes, you’ll need to pay them by the April 15 deadline to avoid being charged a penalty.
• Independent contractors are self-employed individuals who work for themselves and not for an employer.

This form details how much you were paid throughout the year. You can use that information to double-check that you’re reporting all of your income earned through the year. A big financial drawback of self-employment is paying self-employment taxes. These taxes are equivalent to the Medicare and Social Security taxes you’d pay as an employee.

Quarterly estimated tax payments

Receipts and invoices are a record of the financial transactions that occur within your business, which are critical for preparing tax returns and other financial reports. It is important to keep receipts and invoices organized and easily accessible for reference. https://www.bookstime.com/articles/what-is-an-invoice can be complex and challenging. And it helps to consult with accounting professionals to set up your accounting system and maintain appropriate records.

An accounting firm is known for the quality of its service. Our firm’s reputation reflects the high standards we demand of ourselves. Our high standards, service and specialized staff spell the difference between our outstanding performance, and other firms. We make sure that every client is served by the expertise of our whole firm.

How Much Does Accounting Software for Independent Contractors Cost?

As an independent contractor, you’re required to file Schedule C along with your personal tax return. You’ll get monthly financial reports and can rest easy knowing the books are taken care of. Bench doesn’t include accounting, but it does provide the reports and support you need for your accountant to take care of things come tax day. Paid add-on services include online ACH and credit card processing and payroll. But these cost more than some competitors, so if you process a lot of payments, you may end up paying more with Wave’s “free” accounting than you would with a paid app.

Different accounts will help you prove your records if your claims are in question. BooXkeeping is a nationwide provider of affordable outsourced bookkeeping services to small and medium-sized businesses. Consulting with a professional bookkeeper or accountant can provide valuable insights and ensure that you are in compliance with all financial regulations. In summary, invest time and effort in your bookkeeping process, and you will immediately see the benefits. Any independent contractor’s understanding of their business will improve with a clear understanding of their financial situation. They will be better equipped to accurately pay their taxes to the IRS.

Never let your bookkeeping and accounting fall behind

But if you don’t have a record of your expenses, Uncle Sam is happy to tax you based on the larger amount. Hiring a professional to take care of the books will give you more time to concentrate on growing your business. As the business grows, there are more aspects that require your attention, such as acquiring and maintaining clients.

Whether it’s income verification, or a replacement for employment verification with Uber Eats, Doordash, etc., good records will help you do that. When you’re an employee, bookkeeping for independent contractors your income is easily verified by things like your pay stubs and W-2 forms. Or keep track of everything so that you only have to pay on what’s left over.