Independent contractors often have limited time to spare between client work, marketing, and other business activities. Outsourcing bookkeeping allows you to focus on revenue-generating tasks while leaving the time-consuming financial management to experts. Every day that we come into work, we take pride in the part we play in helping our neighbors succeed.

Review Before Taxes

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. In essence, you are not an employee of the company you are working for if you are an independent contractor.

Doing It Yourself (DIY) vs. Outsourcing Bookkeeping for Independent Contractors

• It ensures that every financial aspect is meticulously tracked, providing a safety net that leaves no room for oversight or surprises.
• Essentially, as an independent contractor, you are not an employee of the business you are working for.
• As a result, the program has become commonplace among small businesses and only continues to get more popular.
• Putting your estimated tax payments in each month or every three months will help you avoid a tax bill that isn’t expected.

It’s common for states to include independent contractor agreements in the requirements to carve out specific circumstances from confidentiality provisions. For larger, more permanent relationships, laws often only require examination of an existing agreement to insert any information required that isn’t already included in the contract. However, for businesses with work that is temporary, sporadic, or spontaneous, the requirements will require changes in business operations. Consequences for failure to abide by the laws vary, but can include adverse contractual terms being imposed, multipliers for payment failure, fines, and attorney’s fees.

Furthermore, we can design a new system that’s specialized to the unique needs and priorities of your business. We specialize in organizing your financial records and delivering accurate statements that help you make better decisions. Whether you’re freelancing, consulting, or running a one-person business, we keep your books organized every month, so you can focus on growing your brand. Some of these links will be sponsored, meaning I can receive some pay if you buy off them. You just have to have an idea what kind of expenses are like other expenses of the same kind.

Regular reviews of your books can help you stay organized and make informed financial decisions for your business. Saving money and paying estimated taxes in advance will help set you up for a more promising future. As a general rule, independent contractors should save anywhere from percent of their income for tax purposes. Currently, that means you will pay social security bookkeeping for independent contractors 15.3%-12.4% and Medicare 2.9%. Essentially, as an independent contractor, you are not an employee of the business you are working for. An employee will receive wages regularly, have taxes withheld from those wages, have their schedules created by their employer.

Turn business receipts into data & deductibles

• Some of these links will be sponsored, meaning I can receive some pay if you buy off them.
• Just a few years ago, businesses could approach the independent contractor relationship with little concern or planning.
• Paying taxes and having precise estimates of your upcoming tax obligations are quite beneficial.
• There are many ways an independent contractor can track their income and expenses.

Regular pay, withholding of taxes from that pay, and the creation of an employee’s schedule by their employer are all benefits of employment. Just a few years ago, businesses could approach the independent contractor relationship with little concern or planning. Ensure that the bookkeeping service offers the specific services you need, such as income and expense tracking, tax preparation, and financial reporting. QuickBooks can and should be used for all your construction accounting needs. Some of the many ways to maximize this software are sending invoices, tracking income, accepting payments, running payroll and tracking time on-the-go.

How to do bookkeeping for independent contractors?

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 risk receiving payment directly to your personal account if you are not careful to keep your personal and company bank accounts separate. You may create financial reports that will enable you to plan and make informed decisions for the future with the aid of proper bookkeeping. For example, in 2025, Washington State raised the threshold for a noncompete to be valid in an independent contractor relationship to independent contractors making $301,399.98 or more. The threshold also applies to nonsolicitation agreements that prevent solicitation of anything more than current customers, such as former customers, prospects, or vendors.

Best Online Bookkeeping Services for Small Businesses of October 2023

Every business is unique, and there’s no single system that’s right for everyone. Here at Better Bookkeepers, we apply our bookkeeping for independent contractors extensive experience in bookkeeping in Antioch to create custom solutions for each client. With clear financial info, you can plan better and make smart moves to grow your business. As a one-person powerhouse, you juggle everything—from client work to admin tasks. At Less Accounting, we simplify your finances with expert bookkeeping and historical cleanup, giving you the clarity you need to succeed. Accurate records let you evaluate profitability, identify areas to cut costs, and create strategies to scale your business.

Many new independent contractors will begin by handling their own bookkeeping. Being accountable for your books might help you save money while beginning your firm because cash flow can be limited in the early stages. Reconciling bank accounts is something independent contractors should consider. You can make sure that every transaction matches your accounts by practicing reconciliation. It is different, though, when a business employs an independent contractor.

Keeping track of receipts and invoices is essential for accurate bookkeeping. 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 is important to keep receipts and invoices organized and easily accessible for reference.

Separate Business and Personal Finances:

We chose these as our best accounting apps for independent contractors based on their functions, features, and integrations. We also looked at their pricing, number of versions offered, and whether they tailor the app to the specific needs of independent contractors. The IRS requires independent contractors to pay self-employment taxes.