Independent Contractors: Everything You Need to Know Bench Accounting

The SuperShuttle decision expressly adopted the test set forth by the US Court of Appeals for the District of Columbia, he said. If you train someone, direct their tasks, set specific hours, and dictate how and when the work should be completed, the IRS is likely to see them as an employee. Check out the Small Business Association’s list of Business License and Permits to find out which licenses and permits you may need to do business in your state and industry. Clients will usually ask you to sign a written contract before you start doing work for them (that’s where the “contractor” part comes from).

This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Member Marvin Kaplan, the board’s sole Republican, dissented from overruling SuperShuttle, but concurred in holding that enrolled agent information the Atlanta Opera workers at issue in the case are employees. If you run your sole proprietorship out of a home office, you may be able to deduct a portion of your housing expenses against business income, provided it’s your principal place of business and you use it regularly. In addition to insurance premiums, you can deduct other out-of-pocket medical costs, such as office co-pays and the cost of prescriptions.

Features that fit your business

An accounting contract does more than just lay out the duties and responsibilities of the accountant or bookkeeper brought on as an independent contractor. We chose QuickBooks because we believe it has the most features, ease-of-use, and pricing that most independent contractors will need. But every contractor is different, so one of the other accounting apps on our list may fit your needs better.

An independent contractor agreement for accountant and bookkeeper is an important document to determine, for tax purposes, that the worker is not an employee of the company. Accounting software for independent contractors is worth the cost. An independent contractor is responsible for their own accounting and bookkeeping, as well as tax preparation and deadlines.

What Is Accounting Software for Independent Contractors?

Even Quickbooks requires you to use TurboTax for an extra fee if you want your taxes done in the same place. It is the most expensive service on this list, but includes everything you need to run your basic business administration without lifting a finger. The less-expensive Essential plan offers monthly bookkeeping and a dedicated bookkeeping team while the more expensive Premium plan also offers income tax support. Intuit’s QuickBooks is the best-known accounting app for good reason. While it’s not perfect, it is one of the best accounting programs on the market today and sets a high bar for what business money management apps can do.

First, you’ll need to determine what functions you want an accountant to assist with, as well as how often you’ll require their services. Start by making a list of priorities—the items that need attention right away, and the ones that will need to be addressed within six months. Next, you’ll have to pick if you want to work with an independent accountant or an accounting firm.

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If you can’t file your taxes by the April 15 deadline, you should use Form 4868 to file for an automatic six-month extension. But that’s only an extension to file your paperwork — if you owe any taxes, you’ll need to pay them by the April 15 deadline to avoid being charged a penalty. 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. An independent contractor is anyone who does work on a contract basis to complete a particular project or assignment.

Typically an independent contractor will first send you an invoice, which will specify certain payment terms. Depending on your accounts payable process, you might also send them a purchase order back to confirm the invoice before issuing the final payment. If you’re doing work for someone, you’re not on their payroll, and you signed a contract with them, you’re probably an independent contractor. If you are an independent contractor, then you are self-employed. The earnings of a person who is working as an independent contractor are subject to self-employment tax. To find out what your tax obligations are, visit the Self-Employed Individuals Tax Center.

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Estimated tax payments are due on April 15, June 15, Sept. 15 and Jan. 15 (for the last quarter of the prior year). If any of those dates falls on a weekend or holiday, the due date shifts to the next business day. If that’s your situation, it’s important to know which independent contractor taxes you need to pay and how to pay them, so you won’t get a nasty surprise during tax season.

• Unlike employee wages, which you’ll handle through your payroll, you pay your independent contractors like you would any other kind of supplier, via your accounts payable system.
• Independent also don’t get employee benefits, or protection from employment laws, like the Fair Labor Standards Act (FLSA), the Occupational Safety & Health Act (OSHA) and Title VII of the Civil Rights Act.
• Read more about misclassification and the difference between hiring employees and independent contractors.
• You can always upgrade to a version with more features once your business grows.