The Complete Guide to Independent Contractor Taxes

Doordash gives you no pay stub, neither do any of the others. Keep your own record of the money your delivery business earned. That’s not quite at a rule level statement but important enough to be a very strong suggestion. You should know what it’s really costing you to operate your car. It has to be reasonable or necessary for operating your business. If it meets that criteria, there’s a good chance it’s a legitimate expense.

1. It is worth the money to have someone who understands how it works look things over, and put it all together for you.
2. Different accounts will help you prove your records if your claims are in question.
3. If you do not file your profit and expenses, you are putting yourself at risk of being audited by the IRS.
4. Keeping track of taxable income is an important aspect of bookkeeping for independent contractors.

They can closely monitor your accounts receivable and accounts payable, ensuring timely payments from clients and suppliers. By keeping a close eye on your cash flow, they help you maintain a healthy financial position and avoid any cash flow issues that may hinder your business’s growth. One of the main advantages of outsourcing bookkeeping services is the expertise you gain access to.

Your Dedicated Independent Contractors’ Bookkeeper

You can stuff your receipts into one of our Magic Envelopes (prepaid postage within the US). Use our receipt tracker + receipt scanner app (iPhone, iPad, and Android) to snap a picture while on the go. Or forward a receipt to your designated Shoeboxed email address. Knowing how to do the accounting cycle yourself is a major feat.

Independent contracting comes with a set of unique challenges, especially when it comes to financial management. Unlike traditional employees, independent contractors are responsible for their own taxes, insurance, and retirement plans. As a result, they must carefully track and monitor their income and expenses to ensure compliance with tax regulations and to effectively manage their cash flow. When you’re an independent contractor, paying the government regularly throughout the year is your responsibility. You do this by making quarterly estimated income tax payments.

How a skilled bookkeeper can help maximize business profitability and growth

This will help you separate your financial status from your businesses. In the case of an audit, it is helpful to have everything separate, primarily if you classify yourself as a business. Different accounts will help you prove your bookkeeping for independent contractors records if your claims are in question. 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.

It may also be helpful to consult with a tax professional to ensure that you are in compliance with all tax laws and regulations. Organizing your financial records is a critical step in getting started with bookkeeping. This may include creating a filing system for receipts, invoices, and other financial documents and maintaining a system for recording transactions consistently and accurately.

Do independent contractors need to track everything?

If you’re an independent contractor who needs complete accounting support, you’ll want to check out Bench. It’s an accountant and accounting app in one with two packages available. One important feature you’ll find with Bench is a human bookkeeper, something the other providers on our list don’t have. 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. As an independent contractor, you’re going to have to learn to manage these things on your own.

What does withholding estimated taxes mean?

As an independent contractor, be prepared for additional tax deadlines. Now, in addition to your personal income tax deadline of April 15, you’ll also have both federal and state quarterly tax deadlines. Instead of a W-2, as an independent contractor, you’ll receive a 1099-MISC. This form details how much you were paid throughout the year. You can use that information to double-check that you’re reporting all of your income earned through the year.