Smart Accounting Practices for Independent Contractors

payroll item

This month can be a lot different than the same month last year. Financial reports can prepare your business for the future by looking at your past and present to prepare you for future decisions. No matter how successful you feel as an independent contractor right now, it would help if you looked to the future. Paying taxes and having accurate snapshots of what you are estimated to pay in taxes helps a lot. Paying in your estimated taxes every month or quarter will help you avoid unexpected tax liability.

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. 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. The manual labor of entering data into Excel is likely to bring mistakes.

Never Mix Personal Expenses with Business Expenses

Every independent contractor operates in their own unique way. Each of them offers different services and specializes in a different area. We recognize this, which is why your independent contractor accounting services will be customized to fit your specific needs and goals. Do not let the age of the case fool you into thinking it does not apply in the age of Blackberrys and Wi-Fi; it applies. This is a case you need to read if you are planning on hiring any kind of professional or clerical part-time help. You can find the case by going to the California Unemployment Insurance Appeals Board website and clicking on “precedent decisions.” You will find them listed by case number.

  • In the Nonemployee Compensation section, mark the checkbox for the appropriate nonemployee compensation payroll item.
  • In this blog, we’re going to cover bookkeeping, the difference between independent contractors & payrolled employees, and the benefits of monthly bookkeeping for independent contractors.
  • In addition, keeping your books organized will put you in better position if you ever apply for a business loan.
  • If you do work as an independent contractor, you are technically working for yourself.

Independent Contractor Tax Advisors is a licensed CPA firm that provides accounting services and tax advice for contractors, consultants and other self-employed clients across the U.S. Our clients love us because we simplify their lives and put more money in their pockets. Finally, monthly bookkeeping for contractors simplifies your taxes. It allows you to understand what amount you’ll have to pay during tax season months in advance.

Independent Contractor Tax Tips

It is best practice to reach out to a CPA for advice when choosing what accounting method will work best for your independent contracting business. Anytime you engage in a business relationship with someone who is self-employed, the best practice is to have them fill out and sign a W-9 upfront before they do any work for you. This ensures you are compliant and have the information you need should they meet filing requirements. I’ve pulled in the IRS definition of an independent contractor.

  • If you do not have the documentation, you cannot back up your costs if there is an audit.
  • You might get sick or a natural disaster occurs and you are not be able to complete the work assigned.
  • We’re currently experiencing service issues for contacting Support.
  • The 1099 form is a summary of the total amount they paid you for the tax year.
  • Provides financial statements to the CPA and issues tax related forms for independent contractors in consultation with CPA.
  • CS Professional Suite Integrated software and services for tax and accounting professionals.
  • There are many ways an independent contractor can track their income and expenses.

According to U.S. labor law, accountant for independent contractor contractors are not employees—they are self-employed and do work for clients on a contract basis. If you do work as an independent contractor, you are technically working for yourself. Until you can fill all your business roles with in-house employees, independent contractors are a great resource to cover the gap .

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