On the other hand, accounting software will automatically take your invoices, payments received, payments returned, and expenses to organize your books. ScanWriter assists with automated data entry directly into QuickBooks, including 100s of transactions from bank and credit card statements, bills, sales orders and invoices. A lot of independent contractors find themselves spending countless hours hand-keying data–which takes up way more time than it is worth. Instead of catching up on data entry on your day off, using an automated system will help you get data entered quickly and correctly (less user error!). Above all else, the most significant benefit of utilizing accounting software is creating accuracy and order within your business. Many new small business owners will start by entering all of their bookkeeping on an Excel spreadsheet.
- A traditional bookkeeper will take care of your bookkeeping for you for an hourly rate or a flat monthly fee.
- Independent contractors are responsible for their own tax payments and there are many ways that an independent contractor can improve their financial standing when it comes to tax liability.
- As a fact checker, she ensures statements are accurate and verified by trustworthy sources in the financial industry.
- 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.
- 1099-MISC is an “information filing form” used to report non-salary income to the IRS.
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. It will also suggest categories for organization and store everything related to accounting in one place.
Pay Estimated Taxes
As someone in business for yourself, you are responsible for your own success, and your bookkeeping provides some big clues. Your bookkeeper can help you determine where you may be losing money and which clients are offering the biggest returns on your efforts. A review of your bookkeeping can help you determine your budget and evaluate your spending.
- 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.
- Getting paid to your personal account can be too tempting to sweep it under the rug.
- Most people who call themselves “freelancers” are considered to be independent contractors by the IRS—the two terms are basically interchangeable.
- This program lets you take a picture with your smartphone, catalog it directly with the phone app, and organize based on project, client or another categorization method as you determine.
- We have a broad range of knowledge, experience and skills in using various accounting software that enhances our services.
- As such, you need to be responsible for more than a payrolled employee in terms of financial record keeping.
The accountant for independent contractor statement balance of $5,975 needs to be increased for the $2,000 deposit and to be decreased by the $1,000 check. After these adjustments, the adjusted balance per the bank is $6,975 ($5,975 + $2,000 – $1,000). Interest income from investments such as savings accounts, bonds, and certificates of deposit. Being a small business owner can be exciting and frightening at the same time. The biggest downside to Bench is that if you need the Premium plan, you’ll have to sign an annual contract, so if you’re not happy with the plan, you’re on the hook for an entire year. Several customers on third-party review site report problems reaching customer service or receiving a response to their problems.
How to become an independent contractor
Remember that you must set aside all of your self-employment, Social Security, and Medicare tax contributions yourself as an independent contractor. The same applies when you are purchasing subscriptions for an online service. Determine what the service is providing to your business, and categorize the expense based on that. Expenses related to loans for independent contractors also fall into a different category. As a business owner, it’s important to regulate your processes, especially if you are outsourcing accounting tasks. Having a number of independent contractors can pose a huge problem when protocols are not in place to make sure they are properly regulated.
As a contractor, keeping your accounting transparent will also allow you to see your income and expenses more clearly. The clarity in financials will allow you to make smart decisions on the growth of your company. As an independent contractor, you have a lot more freedom than employees of most workplaces. You pay taxes on your own, set hours on your own, and you are your own boss.
Tax Advantages for Independent Contractors Vs. Sole Proprietors
Compared to having your bookkeeping done for you, accounting software can eat up a lot of hours every month. With accounting software, you enter your business transactions and categorize them yourself. The software separates them into different sections, and can automatically generate financial reports for you. Bookkeeping tracks your finances day-to-day and month-to-month. A qualified accountant helps you plan for the future of your business, and make adjustments to help you save money. When you’re on top of your bookkeeping, you can keep tabs on exactly how much cash you have to work with, plan for the future, and file taxes quickly, accurately, and on time.