We’ll help you file balance sheet Form 1099-NEC and other eligible business deductions to save your business money this tax season. 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. Accounts receivable refers to expected payments that still need to be completed.

Importance of Tracking Expenses as an Independent Contractor

• By choosing the right bookkeeping service, you can focus on what you do best—delivering top-notch services to your clients—while leaving your financial management in capable hands.
• It is important to keep receipts and invoices organized and easily accessible for reference.
• Whenever you are outsourcing the bookkeeping and other accounting task, you need to have a detailed discussion about the work to be done.
• 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 provides you with a clearer picture of the state and direction of your company at the moment.
• Finally, Zoho Books doesn’t sync with as many third-party apps as competitors.

Although independent contractors can resemble ordinary employees, they are actually separate legal entities from the companies for which they work. Everything can be too alluring to just brush it under the rug to get paid to your own account. Even if there are some immediate advantages, like avoiding having to pay taxes on that money, getting discovered during an audit is not worthwhile. As an independent contractor, keeping track of the money you receive and withdraw from your account is crucial. To put it bluntly, if you’ve heard a lot of buzz about QuickBooks Online but aren’t impressed by its high monthly starting price, Zoho Books is a great alternative.

• If QuickBooks Self-Employed was made specifically for self-employed freelancers, why does it only get an honorable mention while QuickBooks Online makes our top five?
• And you’d think a company as popular as Intuit would invest in stellar customer service .
• Here are the critical standard bookkeeping terms you should be familiar with, and they should be your top priorities on the list of what to keep track of as an independent contractor.
• All independent contractors need to stay on top of their company’s accounting and bookkeeping procedures.
• Record keeping for a small business is necessary, but it can be hard to get it right when you don’t have the time or professional assistance.

Tax Payments

You may create financial reports that will enable you to plan and make informed decisions for the future with the aid of proper bookkeeping. It is different, though, when a business employs an independent contractor. independent contractor bookkeeping Contractors are responsible for paying their taxes on time and are not dependent on businesses to deduct income tax on their behalf. Independent contractors are self-employed individuals who work for themselves and not for an employer. They typically work on a project basis and are not considered employees of the company they work for. Independent contractors have a unique set of bookkeeping needs compared to traditional employees, as they are responsible for their own taxes and financial record-keeping.

Forms to Know

If they have experience of working on bookkeeping, then they can handle all the complexity in it properly. As your independent contracting business grows, so does the Airbnb Accounting and Bookkeeping complexity of your financial management. Outsourced bookkeeping services can scale with your business, ensuring that your financial processes remain efficient and effective. Once you establish your entity structure and get a FEIN, you can open a business bank account.

Anyone who works on a contract basis to finish a specific project or task is an independent contractor. You are considered a business by the law because you are an independent contractor. You probably chose to work independently because you wanted to escape the routine weekday or because you possessed a specialty that companies sought after.

• Bookkeeping is critical to running a successful business, as it provides a clear and accurate record of the business’s financial status.
• With accounting software, you can quickly figure out where to cut costs and maximize profits so freelancing is as profitable as possible.
• Good bookkeeping requires knowing how much money you owe and how much you have on hand at any given time.
• Independent contractors typically also must make quarterly estimated tax payments throughout the year.
• Our piece on the 10 best accounting software for small businesses will give you some additional products to consider.

Accounting and bookkeeping software

Join over 1 million businesses scanning & organizing receipts, creating expense reports, and more—with Shoeboxed. You don’t have to hire a bookkeeper or accountant, but it is very beneficial when filing and paying your taxes. Filing late or incorrect amounts of taxes can result in penalties and fines. 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. To digitize, independent contractors can use their mobile devices and Shoeboxed’s app to scan and upload receipts and documents to a designated Shoeboxed account. Since independent contractors don’t have taxes withheld from their paychecks, they must pay self-employment taxes quarterly.

• Using bookkeeping, you can get tax deductions, manage cash flow, and get an overall picture of your business.
• So, outsourcing bookkeeping for independent contractors is one of the efficient ways to get it right.
• Plus, the free plan limits your online payment gateways to Stripe and PayPal.
• Or, if you make most of your money through online sales, our best bookkeeping software for eBay sellers can help.

However, just as there is a difference in the relationship, there is a difference in the way you pay your workers. Shannon Ongaro is a content marketing manager and trained journalist with over a decade of experience producing content that supports franchisees, small businesses, and global enterprises. Over the years, she’s covered topics such as payroll, HR tech, workplace culture, and more. At Deel, Shannon specializes in thought leadership and global payroll content.

Let’s explore the essentials of independent contractor bookkeeping and how outsourcing can be the right decision for your business. The simplicity of having taxes deducted from each paycheck by an employer does not apply to independent contractors. It will also be easier for you to see your income and expenses as an independent contractor if your bookkeeping is transparent. You can decide wisely on how to expand your business thanks to the transparency of the financials. All independent contractors need to stay on top of their company’s accounting and bookkeeping procedures. After Zoho Books, the top accounting software for freelancers includes FreshBooks, QuickBooks Online, Xero, and Wave Accounting—plus a handful of honorable mentions.

Being accountable for your books might help you save money while beginning your firm because cash flow can be limited in the early stages. 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. If your claims are contested, you can support your records with various accounts.