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. You didn’t go into business for yourself to spend time worrying about your bookkeeping. SLC Bookkeeping helps independent contractors stay independent and focused on the other important parts of their operation. Having a clear picture of your financial figures will help in understanding your business better. You can also better determine how to charge for services because you understand the expenses.

You can always upgrade to a version with more features once your business grows. Whether you’re a part-time independent contractor or growing your enterprise, you’ll need to manage your finances, and that means seeking out an accounting app. If you attempt to reconcile your books on your own, it can be a monumental task. Using accounting software like Zero, Wave, or Freshbooks, will allow you to reconcile your bank accounts quickly. Proper bookkeeping will help you set up financial reports that let your plan and make educated decisions for the future. Independent contractors need to pay the IRS self-employment taxes.

Reconcile Bank Transactions

The Tax Cuts and Jobs Act of 2017 set up a new tax deduction for pass-through entities which allows you to deduct up to 20% of net business income earned as an additional personal deduction. You don’t need to do anything to your copy of 1099-MISC, but if you don’t receive one, you should follow up with your client. If you’re looking for a good template contract for an independent contractor agreement, the plain contract is a good place to start. Employees get paid a regular wage, have taxes withheld from those wages, work part or full-time, and have their work and schedule dictated by the employer. The Better Bookkeepers aren’t just good at what we do, but we enjoy it.

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. You can rest assured that we will work closely with you to create actionable business plans and accurate financial reporting. We offer our toolkit of financial intelligence that will be your greatest asset for business growth. Outsourcing your bookkeeping is more affordable than you would think.

An Affordable Bookkeeping Alternative to a CFO

The CPA firm was interested only in the end results they achieved. They were not reimbursed for out-of-pocket expenses and were not given a company car or a mileage allowance. Bench links up with your business accounts—meaning your team automatically tracks all your transactions for you. Small businesses ready to have their bookkeeping handled professionally. Traditional bookkeepers are especially suited to businesses with lots of paper records. A traditional bookkeeper is a local professional who does your bookkeeping for you.

• And, if you make any mistakes, they’ll result in inaccurate books.
• One of the main reasons why it’s better to have accurate financial records is to have a guide with your next move either as an independent contractor or as a business entity.
• Determine what the service is providing to your business, and categorize the expense based on that.
• Suffice it to say that there are many tax benefits and savings that come along with having a separate business entity instead of being a sole proprietor.
• But every contractor is different, so one of the other accounting apps on our list may fit your needs better.
• It can be useful to work with an outsourced bookkeeper who can act as a CFO and examine your processes to ensure you enjoy healthy cash flow while you meet all legal requirements.
• As a general rule, independent contractors should save anywhere from 30-40% of their income for tax purposes.

Independent contractors set their own hours and handle everything else that is needed to get the work done. Note that not all income is taxable, and some forms of income may be taxed differently. It is important to consult with a tax professional or the IRS to understand your tax obligations and ensure that you accurately report all taxable income. You can take advantage of a variety of tax deductions, but you have to document your expenses with receipts and invoices. InDinero is a full-service accounting software with accounting and tax preparation service in one. Like Bench, there is a human element to the service, but you’ll have to reach out to inDinero to get a specific quote for pricing and services.

Never Mix Personal Expenses with Business Expenses

You might get sick or a natural disaster occurs and you are not be able to complete the work assigned. Even a change in the demand for your service can be impacted by changing trends. Independent contractors need to be thinking of bank account reconciliation. The practice of reconciliation will help you ensure that every transaction matches your accounts.

In general, an individual or business is considered an independent contractor if they provide products or services under either a written contract or verbal agreement. You can also call them freelancers as they are not paid on a regular basis unlike full time employees. And while most of the independent contractors choose sole-proprietorship, others opt to establish their own LLC or S-Corp.