Industries We Serve: Independent Contractors

While some other advanced programs feel like they require an accounting degree to navigate, FreshBooks keeps it simple. As a general rule, independent contractors should save anywhere from percent of their income for tax purposes. The question of employee classification has https://www.bookstime.com/ come up a lot in the past few years. The Simple Profit membership provides support to business owners. Get the education and resources you need to make informed business decisions and establish quality business processes, including bookkeeping and cash management tasks.

With our accountant example, an employee accountant will have regular a regular schedule and regular pay, will be provided a phone number, email address, supplies and may get reimbursed for any expenses. S Corporations do have additional organizational requirements including bookkeeping and payroll, and the tax preparation is more complex and slightly more costly. Though payroll can generally simplify the payment process for the business owner. We typically recommend the S Corporation strategy if a contractor generates more than $80K in annual net revenue.

Independent Contractors: Everything You Need to Know

They will be able to pay their taxes to the IRS with more accuracy. They will better understand how to charge for their services by understanding their expenses. If you are concerned about worker classification and have in the past or intend to classify future workers as independent contractors, it is best to consult a business or employment attorney. Federal and state governments have been known to target businesses with substantial payments to independent contractors to audit them.

While hiring a professional may be costly initially, it will save money in the long run. Hiring a professional to take care of the books will give you more time to concentrate on growing your business. →  You can make an unlimited amount of legitimate tax deductions, but you must keep good records of those purchases in case of an IRS audit. Financial reports can prepare your business for the future by looking at your past and present to prepare you for future decisions. When you hire us, you will be treated with care during every step of the process. The DOL reinforces that there is no single test that determines a workers status.

Pay Estimated Taxes and Save!

However, when a company hires an independent contractor, it is different. Contractors are held reliable for their tax payments and do not rely on businesses to withhold income tax for them. As an independent contractor, the law classifies you as a business. 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.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

IRS Postpones Tax Deadline to May 17

The IRS says misclassification is a form of tax evasion, and might come after you for the unpaid employer and employee portions of Social Security, and Medicare if they discover you’ve done it. You can deduct 50% of self-employment tax that you calculated on Schedule SE, because the IRS considers the employer portion of the self-employment tax to be a deductible expense. Join over 1 million businesses scanning & organizing receipts, creating expense reports, and more—with Shoeboxed. Independent contractors, since they are the sole business owner, are responsible for everything that goes on in the business.

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. For most independent contractors, it will be beneficial to bring in a CPA to at least help during accountant for independent contractor tax season. A good accountant can help you with tax season and also create and decipher financial reports like your balance sheet, income statement, statement of cash flow, and more. It gives you a more transparent look into where your business is right now and how it is trending.

How the Paycheck Protection Program Affects Self Employed People

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. Wave Accounting is a free accounting app that works both online and on your smartphone. While there are charges for some extra features like payment processing, payroll, and bookkeeping support, the free starting price point makes it a winner for many independent contractors. An independent contractor does not have the ease of having an employer take their taxes out of each paycheck. You will want to open a bank account specifically as an independent contractor business.