Best Virtual & Outsourced Accounting Services 2023

It’s wise to set aside a portion of each payment received to cover both income and self-employment taxes. 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. Even Quickbooks requires you to use TurboTax for an extra fee if you want your taxes done in the same place.

How Does Accounting Software for Independent Contractors Work?

If you aren’t sure about what type of system you need, we recommend reaching out to a professional bookkeeping company, like BooXkeeping, for a free consultation. The Essential plan ($249 a month if billed annually or $299 billed monthly) focuses on bookkeeping only, giving you access to a dedicated team that performs monthly bookkeeping services. The Premium plan ($399 a month if billed annually or $499 billed monthly) adds tax advising services, end-of-year tax filing, and financial strategy planning. An independent contractor is responsible for their own accounting and bookkeeping, as well as tax preparation and deadlines. Using an accounting app will save you time and money and help you keep track of how much money is coming in and how much is going out. The free version is pretty impressive, even compared to some paid accounting apps.

Accounting and bookkeeping software

Thanks to its comprehensive features and ease of use, Wave Accounting is our absolute favorite free accounting software. Wave doesn’t have any paid plans—instead, its free plan gives you more than what a lot of paid plans charge you for. Unlike FreshBooks, it doesn’t curtail your client number or monthly invoices. And like QuickBooks, Wave automatically categorizes your receipts and expenses by tax category, but Wave does it for free instead of for $30 a month. First, freelancers are required to pay quarterly taxes based on their estimated annual income.

Never combine personal and business expenses

1. The virtual bookkeeping providers above might be our favorite—but if they don’t quite fit your needs, we understand completely.
2. A CPA can review your year-end balance sheet, statement of cash flow, income statement, and other financial records, giving you valuable guidance on what to do going forward.
3. This may include creating a filing system for receipts, invoices, and other financial documents and maintaining a system for recording transactions consistently and accurately.
4. Excel data entry requires manual effort, which increases the likelihood of human error.
5. First, freelancers are required to pay quarterly taxes based on their estimated annual income.

Reconciling your bank accounts regularly can help ensure that your financial records are accurate and up-to-date. And on the accounting software front, Bookkeeper360 syncs with both Xero and QuickBooks Online. But Merritt Bookkeeping’s most stand-out feature might be its in-depth financial reports. Most other virtual bookkeeping services give you basic financial reports only, like income statements and balance sheets. In contrast, Merritt gives you more detailed reports like forecasting and quarterly comparisons. Third, freelance accounting software almost always lets you share your financial data with your accountant for no additional user fee.

As an independent contractor, it is important to understand your tax obligations. This includes understanding the types of taxes you are responsible for, such as income and self-employment taxes. It is also important to keep up-to-date with tax laws and regulations, as these can impact your bookkeeping and tax obligations. However, Merritt can still recommend a solid payroll provider or tax consultant who meets your needs.

Leveraging accounting software like QuickBooks or Xero can streamline the bookkeeping process for independent contractors. These tools enable easy categorization of income and expenses, provide valuable financial reports, and simplify tax preparation. Caryl Ramsey has years of experience assisting in bookkeeping, taxes, and customer service. She uses various accounting software for setting up client information, reconciling accounts, coding expenses, running financial reports, and preparing tax returns.

You have a lot more freedom as an independent contractor than most other types of workers have. You are your own boss, responsible for setting your own schedule and paying your own taxes. BooXkeeping clients, for example, have regular monthly calls to review their reports with their Chief BooXkeeping Officer. At Business.org, our research is meant to offer general product and service recommendations. We don’t guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.

Reviewing your books regularly is important to stay on top of your bookkeeping. This may include reviewing financial reports, reconciling bank accounts, and monitoring cash flow. Regular reviews of your books can help you stay organized and make informed financial decisions for your business.

Once receipts and documents are uploaded, Shoeboxed automatically organizes and categorizes the scanned data into tax or customized categories. Over a million businesses have automated their expense and document management with Shoeboxed. Accounting software helps you calculate your tax estimates and makes it easy to reconcile your bank transactions. This will separate your business transactions from your personal expenses.

Both groups need to balance their books, track expenses, and get paid on time. But freelancers have unique bookkeeping needs that don’t always apply to other small-business owners, especially in terms of tax obligations. As your independent contracting business grows, so does the complexity of your financial management.

There are free and paid versions, and typically the paid versions have more features. Some apps offer free 30-day trial periods and others offer discounts for paying annually in advance. Recording payments and deposits are an important part of bookkeeping for independent contractors. This includes tracking clients’ payments and any deposits made into your business bank account. This information is critical for managing cash flow and preparing tax returns.

QuickBooks Online and Zoho Books are two great places to start if managing contractor payments is a top priority for you. Wave doesn’t have an accounting app, which means you can’t upload receipts or track mileage like you can with Xero, FreshBooks, Zoho, and QuickBooks. If you manage clients and inventory with financial tools other than Wave, you’ll likely spend more time on redundant data entry than you’d like. It includes inventory management with each plan—even its cheapest, which costs just $13 a month. When it comes to business finance, freelancers and other small-business owners have a lot in common.

This information is critical for preparing tax returns and accurately reporting your taxable income. Accounting software for independent contractors is accounting software that is geared toward independent contractors rather than big companies. The software can be an app used on your phone or tablet or one downloaded to your computer. Keeping track of receipts and invoices is essential for accurate bookkeeping. Receipts and invoices are a record of the financial transactions that occur within your business, which are critical for preparing tax returns and other financial reports.