How to set up as an independent contractor in the US

accountant for independent contractor

Paid add-on services include online ACH and credit card processing and payroll. But these cost more than some competitors, so if you process a lot of payments, you may end up paying more with Wave’s “free” accounting than you would with a paid app. Wave Accounting is a free accounting app that works both online and on your smartphone. 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. Your personal income tax deadline as an independent contractor is the same as it is for employees. All personal income tax, filed with Form 1040, is due April 15 of each year.

accountant for independent contractor

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Reporting self-employment income

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. There are different laws for what types of licenses or permits you may need to operate, depending on which state and industry you’re working in. Bookkeepers in California don’t need a Colorado pesticide applicator license, but exterminators working in the Denver area might. Here’s a simple example of how to calculate your self-employment tax.

  • Bench doesn’t include accounting, but it does provide the reports and support you need for your accountant to take care of things come tax day.
  • We will also connect your financial accounts to your bookkeeping software and begin data entry.
  • If you specialize in tax preparation, your work may be seasonal.
  • If your business has paid an independent contractor more than $600 for the year, you must complete Form 1099-NEC.

Using Schedule SE, you calculate that you owe self-employment taxes of $5,914. Half of this tax that you pay ($2,957) is taken as a deduction on Page 1 of your Form 1040. The current self-employment tax rate is 12.4% for Social Security and 2.9% for Medicare — a total of 15.3% just in self-employment tax.

How do I get paid as an independent contractor in the United States?

With nearly 60 million Americans identifying as independent contractors, it’s important to understand how your business should account for these types of workers come tax season. Your company may hire independent contractors for a wide variety of projects, accountant for independent contractor many of which fall outside the scope of your existing team’s responsibilities. One of the main reasons why it’s better to have accurate financial records is to have a guide with your next move either as an independent contractor or as a business entity.

  • 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.
  • Now, in addition to your personal income tax deadline of April 15, you’ll also have both federal and state quarterly tax deadlines.
  • You can also add on payroll through Gusto starting at $40 per month.
  • Not only that, we’ve encountered many different scenarios among independent contractors too.
  • Check with your local business administration authority, especially if you’re providing services or products that are subject to state or federal regulation.
  • These taxes are equivalent to the Medicare and Social Security taxes you’d pay as an employee.

You’ll likely need to file Form 8829 along with your Schedule C when taking the home office deduction, which you can learn more about in our guide to the home office deduction. They tend to get paid for projects, they worry about their own taxes, and work when and where they want. Both of the packages offer a free demo so you can check them out to see if the service is right for your business.

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