Bookkeeping for Employees vs Independent Contractors

Businessmen by trade, adventurers at heart; we understand the difficulties of running a small business and balancing a fulfilling life outside of work. With this efficient bookkeeping system, financial reports can be generated that will help the business owner make sound decisions about the future. If you are curious, check out our guide for the details about virtual bookkeeping. This means that anyone who uses an independent contractor’s services is not required to provide employee benefits or take out any withholding from their paychecks. 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. As a contractor, bookkeeping for independent contractors 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.

Independent Contractor  Accounting Services

Not all accounting firms have experience working with different types of business entities– but we do. Our company worked with several independent contractors in different service realms. We understand the pain points that independent contractors have and how to solve them. Lastly, rely on the experts to handle payroll for full time employees. The most costly accounting mistakes are often related payroll errors. Having a professional accountant handle tax withholdings and worker classification will greatly reduce your risk exposure to bookkeeping errors.

If you’re telling the person to come in [at a] certain time, you’re using your equipment, they’re wearing your company logo, it boils down to control. To learn more about an independent contractor agreement for an accountant and bookkeeper, you can post your legal need on UpCounsel’s marketplace. We narrowed them down to the top seven after reviewing the most popular ones. 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. There are a variety of bookkeeping differences when dealing with employees or independent contractors.

bookkeeper independent contractor jobs

On the other hand, the company doesn’t withhold these taxes for independent contractors. These expenses that would normally be covered by an employer are passed to the independent contractor. Companies that work with accountants, particularly accounting and bookkeeping firms, must check if their accountants are licensed in California. If not, these employers will be subject to the ABC test instead of the Borello test. Assembly Bill 5 (AB5) is a law that affects how companies, both in-state and out-of-state, do business throughout the state of California. This anti-gig economy bill tightens up the rules about which workers may be classified as independent contractors versus employees.

Currently, that means you will pay social security 15.3%-12.4% and Medicare 2.9%. You will get paid for the projects you work on, do taxes on your own, and work when you want to work. →  As an independent contractor, you receive 1099s at the beginning of the year for the previous calendar year.

QuickBooks

There are free and paid versions, and typically the paid versions have more features. Some apps offer free 30-day trial periods and others offer discounts for paying annually in advance. Self-employed or not, you need to monitor what’s going in and out of your bank accounts.

It can be tempting to hire an independent contractor over a full time employee – no overtime pay, no health insurance benefits, no need for office equipment, and greater flexibility. However, failing to properly classify an independent contractor can lead to devastating consequences for a small business. There is a long list of companies that have been sued by former employees claiming that they were incorrectly classified as independent contractors. Successful plaintiffs can seek compensation for back wages, legal fees, and related damages. Smart business owners must ensure that independent contractors are fully eligible to be classified as such.

Job Seeker Tools

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. Here’s how FreshBook’s four plans shake out in terms of cost and features. It’s important to note that we provided the regular monthly pricing, but each plan except for the Select plan are discounted by 50% for the first six months and includes a 30-day free trial. Each plan also lets you add an additional user for $11 per month per user. Independent contractors may sometimes seem like another employee, but they are a completely different business entity than the businesses they perform work for.

As a business, you will need to pay taxes and keep up with your bookkeeping as well. You likely became an independent contractor to get away from the typical workday or have a particular skill that businesses desire. However, you may not have realized how important it is to make sure you keep up on bookkeeping and accounting as an independent contractor. 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. We will help you use your reports and KPIs to make informed, profitable decisions.

bookkeeping for independent contractors

When trying to track business expenses and income, it’s best if you have a separate bank account set up for your business as an independent contractor. 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.

The income on each 1099 is reported to the IRS, meaning any discrepancy on your tax return is likely to raise some red flags. Join over 1 million businesses scanning receipts, creating expense reports, and reclaiming multiple hours every week—with Shoeboxed. Being a bookkeeper for yourself and having an efficient bookkeeping system in place is essential if you’re an independent contractor. Also, because there is so much to keep track of, it’s important to stay on top of all of the accounting and bookkeeping duties.