Employee or Independent Contractor: Factors and Decisions

However, it is highly beneficial to create your Employer ID Number. There are many tax benefits and saving that come along with having a business entity. Tracking the money you bring in and the money you send out of your account is essential as an independent contractor. Anytime you complete more than $600 of work for a client, they will need to file and send you a copy of Form 1099-MISC. This is an information form for filing to send non-salary income numbers to the IRS.

You many not have considered this, but requesting your own EIN or Employer ID Number can greatly benefit you. Instead of just being a “contractor for hire,” becoming your own business provides many tax breaks that you https://www.bookstime.com/articles/project-accounting wouldn’t receive otherwise. No matter your reason, your goal is to become as successful as possible to maximize your income and profit. Below are seven great ways to become more successful as an independent contractor.

Monthly Child Tax Credit Payments Come To An End

Paying taxes and having accurate snapshots of what you are estimated to pay in taxes helps a lot. Paying in your estimated taxes every month or quarter will help you avoid unexpected tax liability. If you do not file your profit and expenses, you are putting yourself at risk of being audited by the IRS.

If the business had a reasonable basis, they may eligible for relief from paying the back employment taxes. If there is no reasonable basis for having treated the worker as an independent contractor, the business can be held liable to pay employment taxes for past years and going forward. LYFE Accounting has extensive experience in servicing independent contractors. We manage books, file tax returns and project and budget future sales and expenses.

Get professional help

Above all else, the most significant benefit of utilizing accounting software is creating accuracy and order within your business. Many new small business owners will start by entering all of their bookkeeping on an Excel spreadsheet. The manual labor of entering data into Excel is likely to bring mistakes.

Several customers on third-party review site report problems reaching customer service or receiving a response to their problems. Accounting software will make it easier to do so with the ease of invoicing. Accounting software allows you to invoice your clients and keep up on unpaid invoices. Financial accountant for independent contractors reports can prepare your business for the future by looking at your past and present to prepare you for future decisions. Get the full rundown on what you need to know about self-employed earnings and self-employment tax. Receipts and expenses are stored, organized, and ready for when you need them.

IRS Issues Economic Impact Payment Letter for Third Stimulus Check

Let us take the wheel when it comes to tracking your cash flow and keeping your records. That way you can concentrate on putting the hammer down, collecting green stamps, and keeping the shiny side up. When your business is helping other businesses succeed, you can quickly lose sight of your own need for accurate financials.

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. Earning a living as an independent contractor provides you with more flexibility and control over your work. It also allows you to take advantage of some tax benefits that aren’t available to employees. However, whether these people are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. If a business is found to have classified a worker as an independent contractor when they were really an employee, the IRS will determine if you had a reasonable basis to do so.

Zoho Books

If your part-time business generates more than 1,000 invoices a year, you’ll need to upgrade. But even the Standard version, priced at just $15 per month billed annually, which offers up to 5,000 invoices a year should be enough for most part-timers. Features include invoicing, expenses, time tracking, projects, estimates, payments, reporting, and a mobile app. While some other advanced programs feel like they require an accounting degree to navigate, FreshBooks keeps it simple. As an independent contractor, you probably understand the need for outsourcing some aspects of a business.

See LA Times article, California’s top court makes it more difficult for employers to classify workers as independent contractors and CA Assembly Bill No 5, Section 621(b). The Borello test does not guarantee the worker can be an independent contractor. Our team will file your tax return based on your books, records and any additional information you provide.