4 Accounting Tips for Independent Contractors
When you operate as an independent contractor, you must keep tight financial records to meet your yearly targets and reduce your annual tax obligations. Since you are on the hook for the total owed amount for social security and Medicare taxes, you must keep your records straight to take the credits and deductions that will offset your obligations the most. Furthermore, good accounting practices allow you to improve your contractor operations year to year to maximize your profits as you build your career. Here are the top accounting tips to use during your time operating as an independent contractor.
Maintain a Physical Ledger
Although a physical ledger seems outdated, this tried and true accounting method keeps you on the ball when it comes to tracking your finances. You must physically input your income and expenses as you process those funds to keep your books balanced. When you jot down the information, you create a running tally of your financial information that can be used for professional growth or tax preparation purposes.
Use the Leading PC and Phone Software
In addition to a physical ledger, you can also utilize accounting software on your computer or phone to stay on top of your MO operations. The software allows you to track your hours, wages and expenses in an easily accessible format. You can generate invoices, link the software with your bank accounts and even compile the data in neat graphs for overview purposes.
Keep All Receipts and Documents Organized
You will receive a 1099 from each company you provided with contracted services totaling over $600
across the course of the year. In addition to these important forms, you must keep all invoices and receipts for your quarterly or end of the year tax calculations. Keep the documents in a secure folder for at least seven years to remain in compliance with the IRS guidelines.
File Quarterly Estimate Tax Payments
When you estimate and file quarterly tax payments, you avoid paying a huge bill at the end of the year. You also reduce the chance of owing fees and penalties issued for underpayments and late payments. If you are able to apply deductions and credits at the end of the year, you may receive a portion of the funds back as a refund.
You can receive help setting up your accounting methods, and calculating your taxes, from the professionals at accountRely in St. Louis, Missouri.