The Ultimate Guide To Bookkeeping for Independent Contractors

bookkeeping for independent contractors

Accounts payable are expenditures that have been set but have not yet happened. Perhaps you owe the money, but it hasn’t yet left your bank account. Knowing how much money you owe and how much you have on hand at any particular moment is essential for good accounting. When it comes to choosing a bookkeeping service, it is essential to prioritize confidentiality and data security.

  • has taken the stress out of bookkeeping for me, providing a cost-effective and reliable solution that allows me to focus on what I do best.
  • This expertise enables them to accurately calculate and file taxes on behalf of contractors, reducing the risk of penalties and optimizing their tax position.
  • It’s easy to use, it can link up with your bank accounts and it’s designed to make it as easy as possible to figure out your expense categories.
  • The mainstay of bookkeeping for independent contractors is profit tracking, which you can do if you keep track of your earnings and outlays.
  • As the business grows, there are more aspects that require your attention, such as acquiring and maintaining clients.

While some other advanced programs feel like they require an accounting degree to navigate, FreshBooks keeps it simple. This program is the standard for small business accounting, and it offers much more than an independent contractor probably needs. But it also features everything an independent contractor will likely need, including live bank connections, invoicing, payment processing, and mobile apps. Having a clear picture of their financial figures will help any independent contractor understand their business better. They will be able to pay their taxes to the IRS with more accuracy. They will better understand how to charge for their services by understanding their expenses.

Record All Business Costs

In the next section, we will discuss important tips to help you select a reputable bookkeeping firm that understands the importance of protecting your financial information. When searching for a bookkeeper, it is important to consider their qualifications and experience. Look for someone who is knowledgeable in accounting principles and practices, and preferably has experience working with independent contractors. They should be familiar with the specific financial challenges that independent contractors face and understand the unique needs of your industry. As an independent contractor, you’re going to have to learn to manage these things on your own. If you’re just starting out or only have a few clients, then start with a basic version of accounting software that is less expensive.

  • As we get into the last quarter of the year, some of you are starting to think about things like taxes and all that.
  • Putting your estimated tax payments in each month or every three months will help you avoid a tax bill that isn’t expected.
  • This is an information form for filing to send non-salary income numbers to the IRS.
  • Here’s how FreshBook’s four plans shake out in terms of cost and features.
  • It provides you with a clearer picture of the state and direction of your company at the moment.
  • By maintaining accurate financial records, a bookkeeper provides you with a clear understanding of your business’s financial health.

It includes invoicing, live bank connections, income and expense tracking, and collaborators. It even has the ability to track multiple businesses (like a “side hustle” bookkeeping for independent contractors or two) and personal finances in the same account. Xero gives QuickBooks a run for its money when it comes to accounting features for independent contractors.

How to Pay your Taxes as an Independent Contractor

That means it’s all up to you to do the things that can support your standing. Whether it’s income verification, or a replacement for employment verification with Uber Eats, Doordash, etc., good records will help you do that. It’s like any business, it costs money to operate your business. Join over 1 million businesses scanning receipts, creating expense reports, and reclaiming multiple hours every week—with Shoeboxed.

Doordash and Uber Eats and Grubhub don’t care what it costs and it really isn’t their business. If we can do it well and do it inexpensively, there’s more left over. But if it costs us to get the stuff done, that comes out of OUR pockets, not theirs. You can stuff your receipts into one of our Magic Envelopes (prepaid postage within the US). Use our receipt tracker + receipt scanner app (iPhone, iPad, and Android) to snap a picture while on the go.

Best for Combined Bookkeeping and Tax Prep

Zoho made our pick as best accounting software for part-time contractors because its basic, free version provides everything most contractors will need–all at no cost. 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. Wave Accounting is a free accounting app that works both online and on your smartphone. However, when a company hires an independent contractor, it is different.

A bookkeeper can also help identify potential areas of cost savings, such as overlooked deductions or inefficient spending, which can significantly impact the bottom line. One of our independent contractor clients saw a 30% increase in their profits after partnering with for bookkeeping services. We were able to help them track expenses and manage their finances, giving them more control over their business finances and helping them make informed financial decisions. We can help you by providing bookkeeping services that cater specifically to independent contractors. From tracking expenses to invoicing clients, we will take care of your bookkeeping needs so that you can focus on growing your business.

Accounting software for independent contractors is worth the cost. An independent contractor is responsible for their own accounting and bookkeeping, as well as tax preparation and deadlines. Using an accounting app will save you time and money and help you keep track of how much money is coming in and how much is going out. Accounting software for independent contractors works like other accounting software in that you download the app, create an account, and start entering your data.

Intuit’s QuickBooks is the best-known accounting app for good reason. While it’s not perfect, it is one of the best accounting programs on the market today and sets a high bar for what business money management apps can do. QuickBooks is great for a wide range of businesses from solo freelancers to brick-and-mortar empires. If you are not diligent in separating your personal and business bank accounts, you might get paid directly to your personal account. Keeping on top of the accounting and bookkeeping practices of your business is crucial to all independent contractors.



Share this page