How to Properly Classify Employees and Contractors for Bookkeeping Purposes

bookkeeping for independent contractors

In this section, we’ll explore how freelance health insurance works, including health insurance coverage, the Affordable Care Act, and Marketplace. When deciding to bring in a professional or not, you may ask yourself if you can afford to. However, what you should be asking is, can you afford to not bring in a professional to help with such important information. If you do not have the documentation, you cannot back up your costs if there is an audit.

bookkeeping for independent contractors

You can dump as many receipts there as you want, either via the web or mobile app. I uploaded a few and was pleasantly surprised to see that TrulySmall has OCR, meaning no manual data entry. Just tick all the transactions that look ok, and push them over to your books. Wave lets you attach your receipts to expenses, so you have everything in one place, but it won’t extract data for you—you’ll have to input it manually. It also has some useful extra features, including Wave Checkouts, which allows you to accept payments from your website with a payment link. The whole app has a friendly vibe, with rounded fonts and simple icons.

Send new FreeAgent contacts to Google Contacts

Additionally, independent contractors don’t have to go through as much training and onboarding as payrolled employees. Contractors are commonly hired for a specific service, so the bulk of what they do is completing assignments and tasks in relation to the service they were hired for. There isn’t as much need for employers to educate contractors on work culture, team dynamics, and the company’s long-term goals. There’s more of an emphasis on building long-term relationships with hired employees who are expected to grow alongside the company they work for.

The IRS uses 20 different factors for classifying an employee v. an independent contractor. In today’s age of telecommuting, the location where an employee works is less important than “how” an employee works. As the business world evolves to keep pace with changing technology, bookkeeping grows more complex and there are more questions accountants may have to answer for their clients. All of your bank and credit card transactions automatically sync to QuickBooks to help you seamlessly track your income & expenses. These financial statements include your income statements and balance sheets. Employees get paid a regular wage, have taxes withheld from those wages, work part or full-time, and have their work and schedule dictated by the employer.


Several customers on third-party review sites report problems reaching customer service or receiving a response to their problems. Third-party customer reviews point to significant problems law firm bookkeeping reaching customer service and getting resolutions to their problems. You can connect Fiverr Workspace to Zapier, so you can spend more time making money and less time doing admin work.

However, as a new business, you do not have to make these contributions for the first six months, and you will pay a significantly reduced amount for the following 18 months. If you do opt for the sole proprietor model, you must first register your business with the Central Register and Information on Economic Activity (CEIDG). Note that if you earn (or anticipate to earn) less than 50% of the Polish minimum wage each month, you do not need to register (currently, this figure is zł1505 (around $365)).