bookkeeping for independent contractors

Working with a professional accountant and bookkeeper will help to eliminate much of the stress that comes from being a business owner and helps you stay on track financially. In addition, keeping your books organized will put you in better position if you ever apply for a business loan. This is a smart plan regardless, but especially if you are classified as a business. Any audit that may occur is instantly easier due to the separation of these accounts.

Self-employed or not, you need to monitor what’s going in and out of your bank accounts. Our bookkeepers will develop an easy framework when setting up your books. There are a lot of business expenses that independent contractors need to keep track of in order to pay the least possible income tax.

Best self-employed accounting software for ease of use

But, how much do you really know about independent contractors vs. employees? Read on to learn what is an independent contractor and how they differ from employees. As is always recommended when drawing up any kind of legal document, both parties can be well served to consult a qualified attorney with experience in independent contractor contracts. They can help with negotiations, but at a minimum they will see to it that the basic requirements of any accounting contract are included. Read more about misclassification and the difference between hiring employees and independent contractors.

bookkeeping for independent contractors

It better tracks the money you have coming in and the money you have going out. Using monthly bookkeeping, you can gain invaluable insight into what expenses can be written as deductions when you file your tax return. You and your bookkeeper can work together to simplify the monthly overview of your finances as an independent contractor. But what is bookkeeping and why should contractors care so much about it?

Bookkeeping for Independent Contractors: Everything You Need to Know

On the flip side, contractors have more freedom and flexibility in the way they work. A worker’s employment status determines your payroll tax liability. As mentioned, if you classify a worker as an employee, you are required to withhold certain taxes, like Social Security or Medicare taxes. As an employer, you might also be responsible for remitting unemployment taxes, too (e.g., FUTA tax).

  • The bookkeeping services agreement is between a client and a bookkeeper to provide accounting services for a one-time or monthly basis.
  • We’ll email you 1-3 times per week—and never share your information.
  • You can take advantage of a variety of tax deductions, but you have to document your expenses with receipts and invoices.
  • Most accounting apps can be integrated with other apps such as mobile banking, customer relationship management (CRM), and mileage tracking.
  • Import expenses directly from your bank account and effortlessly sort business from personal.

Despite the intuitive experience, there isn’t a lot of embedded help in the app or a detailed onboarding sequence. Luckily, the knowledge base is pretty thorough, so you can tab out from time to time to figure things out if necessary. Even if law firm bookkeeping you don’t choose Wave as your accounting app, you can still grab it here and have a read. When you start out, most of the pages will have no data to show, but FreshBooks has scribbled tips everywhere to show you what will happen on each page.

Benefits  Of Independent Contractor Accounting

We understand the pain points that independent contractors have and how to solve them. SLC Bookkeeping has helped hundreds of small business owners with managing their back office functions and growing their businesses. Whether you need help deciding what kind of entity to launch or would like assistance with back paperwork, financial planning or growing your business, call SLC Bookkeeping. For a fraction of the cost of a full-time employee, SLC provides you part-time, outsourced bookkeeping with a full-time presence. Unlike employee wages, which you’ll handle through your payroll, you pay your independent contractors like you would any other kind of supplier, via your accounts payable system. If you’re an independent contractor, you have to pay self-employment taxes to the IRS (the current rate is 15.3%—12.4% for social security and 2.9% for Medicare).

  • If you do opt for the sole proprietor model, you must first register your business with the Central Register and Information on Economic Activity (CEIDG).
  • Hiring a professional to take care of your bookkeeping services will allow you the freedom you need to grow your business as an independent contractor.
  • They’re categorized differently than payrolled employees in terms of taxes and bookkeeping.
  • While there are plenty of benefits to working as an independent contractor, keep in mind that it does come with its disadvantages.
  • A percentage of each check is withheld to fund unemployment, social security, Medicare, and tax liability.
  • A worker’s employment status determines your payroll tax liability.