There are many ways an independent contractor can track their income and expenses. How your friend does their bookkeeping might be different from how you do it. Most importantly, you must find a financial tracking system that works for you and stick to it. We narrowed them down to the top seven after reviewing the most popular ones.
Linda Rost’s Better Bookkeepers
Most businesses do not have trained staff in-house who can do bookkeeping well. That is why outsourcing bookkeeping for independent contractors helps many. Proper bookkeeping provides clarity and accuracy in your financial records, allowing you to make informed decisions and grow your business.
According to McKiney’s, American Opportunity Survey, 36% of the workforce or 58 million Americans are independent contractors. This prevents tasks from piling up and ensures your records are always current. Setting yourself up for a more promising future will involve saving money and paying anticipated taxes in advance.
Bookkeeping for Independent Contractors and Small Businesses
Whether you’re a seasoned pro or just starting, understanding contractor bookkeeping is crucial to running a successful business. That’s why it’s important to keep business and personal expenses separate by opening a separate bank account. As an independent contractor, it is important to understand your tax obligations. This includes understanding the types of taxes you are responsible for, such as income and self-employment taxes.
- Bookkeeping for independent contractors is not just about recording numbers.
- You can make sure that every transaction matches your accounts by practicing reconciliation.
- The practice of reconciliation will help you ensure that every transaction matches your accounts.
Update Records Often
One of the main reasons for this is to make your tax reporting a lot easier and get you back to work as quickly as possible. As an independent contractor, you are responsible for paying quarterly income taxes–which can be an arduous process if you don’t know what you’re doing. Having an accounting system in place will increase productivity and help your business run efficiently. Reviewing your books regularly is important to stay on top of your bookkeeping.
Why Choose Better Bookkeepers
- This is an informational form that must be submitted to the IRS in order to report non-salary income.
- This may include creating a chart of accounts, setting up a system bookkeeping for independent contractors for recording financial transactions, and establishing a process for reconciling bank accounts.
- Neglecting to track these can skew your financial reports and reduce your deductions.
- You will have to pay taxes and maintain your bookkeeping as a business.
- Streamline your processes with tools like QuickBooks, Xero, or Wave.
It’s time to streamline your business and let me handle your bookkeeping. Independent contractors need to be thinking of bank account reconciliation. The practice of reconciliation will help you ensure that every transaction matches your accounts. A CPA can review your year-end balance sheet, statement of cash flow, income statement, and other financial records, giving you valuable guidance on what to do going forward. If you are an independent contractor or self-employed business owner and would like help with your bookkeeping, contact us today and schedule a free consultation with one of our expert advisors. In conclusion, bookkeeping is essential to running a successful business as an independent contractor.
In addition to the scope of our services and the tailored approach we take to bookkeeping, there are several other factors that make us the right choice. It’s a specialized computer program that’s designed as a flexible, easy-to-use accounting solution. As a result, the program has become commonplace among small businesses and only continues to get more popular. You get reports and news about your money, so you stay informed and ready to make decisions. Add new income and expense details every week or at least once a month.
Paying in your estimated taxes every month or quarter will help you avoid unexpected tax liability. A Schedule SE will be one of the schedules of your individual income tax return Form 1040. Here are key points to consider when outsourcing bookkeeping for independent contractors. Outsourcing bookkeeping for independent contractors is a smart way to keep your books right. Open a dedicated business bank account to avoid mixing personal and business expenses.
Join over 1 million businesses scanning & organizing receipts, creating expense reports, and more—with Shoeboxed. Since independent contractors don’t have taxes withheld from their paychecks, they must pay self-employment taxes quarterly. Shoeboxed is an expense & receipt tracking app that helps you get reimbursed quickly, maximize tax deductions, and reduce the hassle of doing accounting. If your business is small, your transactions are straightforward, and you’re comfortable with tools like QuickBooks or Wave, managing your books yourself can be cost-effective. Use your bookkeeping bookkeeping for independent contractors data to project your tax obligations and set aside a portion of your income with each payment.
As an independent contractor, hiring a professional to handle your bookkeeping needs will give you the freedom you need to expand your company. You should open a separate bank account for your independent contractor firm. You can more easily do this by separating your money situation from your business affairs. It is advantageous to have everything separated in the event of an audit, especially if you consider yourself to be a business.
For independent contractors, a robust bookkeeping system is not just a necessity; it’s a lifeline. It ensures that every financial aspect is meticulously tracked, providing a safety net that leaves no room for oversight or surprises. They must track their business expenses to deduct them from their income on their tax return. Proper documentation of these expenses is crucial to taking advantage of various tax deductions during tax filing.