Do I Need an Accountant To File My Taxes?

While all expenses affect the bottom line, there is good reason to turn to a specialist if you are losing sleep, billable time and income by trying to do it all yourself. Working with the right CPA firm is an investment, and eventually can help you grow your business. Per Diem Rates Still Apply
If you have yourself set up as an employee of your company, you may be entitled to a per diem allowance when you travel a certain distance from home to conduct business.

Owning a company allows you to leverage your retirement plan to contribute well up to $50,000 (and in some cases more) tax free dollars depending on the type of plan you choose. This is one of the best ways to build up your nest egg for your future. 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. You can deduct 50% of self-employment tax that you calculated on Schedule SE, because the IRS considers the employer portion of the self-employment tax to be a deductible expense. If you’re looking for a good template contract for an independent contractor agreement, the plain contract is a good place to start.

Turn business receipts into data & deductibles

Proactively Estimate to Save
The number one mistake independent contractors make is failing to plan for their full yearly tax burden. Independent contractors must ensure that they account for self-employment tax in addition to income tax. Since revenue can be dynamic and your annual tax liability can change based on new projects and expenses, we recommend mid-year tax planning to adjust for revenue changes and business development. If you don’t tax plan, at least consider opening a separate bank account for taxes and each time you receive a client payment, deposit a percentage based on the tax bracket. Finally, monthly bookkeeping for contractors simplifies your taxes. It allows you to understand what amount you’ll have to pay during tax season months in advance.

• When working with independent contractors, you have to provide a different set of guidelines to establish rules and responsibilities.
• There are free and paid versions, and typically the paid versions have more features.
• But you must report the independent contractor’s payment to the Canada Revenue Agency (CRA) if the annual amount paid per contractor exceeds $500.
• Misclassification has the potential to create a huge tax bill for both parties.

Any income that you earn as an independent contractor must be reported on Schedule C. You’ll then pay income taxes on the total profit. If you choose an accountant to prepare your taxes for you, be sure to bring all relevant documents, receipts, and forms sent to you by the IRS, employers, and financial institutions. That includes W2s, 1099s, and paperwork for things like mortgage payments, retirement accounts, or student loans.

Brian Wendroff Nominated for Two Regional Business Awards

You are not required to take deductions from an independent contractor’s pay for expenses such as Canada Pension Plan (CPP) and Employment Insurance (EI) contributions. Leverage Your Health Benefits
Properly managing your health https://www.bookstime.com/articles/startup-bookkeeping benefits can effectively reduce your tax liability. For 2012 you can contribute up to $3,100 for an individual, or $6,250 for a family. As you pay for medical expenses to meet your deductible, they are taken from your HSA.

If you’re self-employed, you’re not required to hire a bookkeeper or an accountant. However, hiring a professional is highly recommended when it comes to filing your taxes and making your tax payments. Submitting late or incorrect amount of tax payments can result in penalties and fines. When trying to track business accountant for independent contractors expenses and income, it’s best if you have a separate bank account set up for your business as an independent contractor. As an independent contractor, you’re going to have to learn to manage these things on your own. Keeping accurate financial records is the best way to account for your tax liability.

Is Accounting Software for Independent Contractors Worth the Cost?

Regardless of the additional requirements, the strategy can significantly reduce your tax liability if you’re in the right situation. 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. Xero gives QuickBooks a run for its money when it comes to accounting features for independent contractors.

• Your accountant can provide you with a detailed financial picture and tell you how you can achieve the highest profit margins.
• The trade-off is that your employers do not put money towards your health insurance, workers’ compensation, bonuses, unemployment taxes, payroll taxes, or contribute to your 401(K).
• Consistent and clear communication ensures that problems are resolved quickly and helps avoid delays.
• By hiring a monthly bookkeeper, you’ll better track your payroll and be provided with current insight into your finances.
• The biggest pro of having independent contractors is having recourse if the work is shoddy, as well as not having to pay payroll taxes.
• An S Corporation allows the business owner to hire themselves as the “manager” of the business, paying themselves a reasonable salary (portion of total revenue) through payroll.