How to do Self-Employed Bookkeeping for Freelancers & Independent Contractors


Self-employed bookkeeping can be confusing, this guide should help you out.

The 6 items you need for self-employed bookkeeping: tips for small business

1. Create a bookkeeping ledger

It is the first thing self-employed bookkeeping needs.

A ledger provides a complete record of all accounts and financial transactions over the life of the company. It is important to keep your business money separate  from any personal money even on day one.

You can set up bookkeeping ledgers  in Microsoft Excel, or there are many online versions including QuickBooks Self-Employed, or some of the bookkeeping software that makes all the process much more efficient, automating tasks such as minimizing manual entry or making calculations without mistakes.

However, it could just be the right thing to use an online accounting service like ALOEwerx to do this step for you.  

2. Connecting accounts

There are some things employed people don’t need to care about much. But, for you who runs your own company, certain things should be easier – and managing your bank accounts is definitely one of them.

If you choose to use QuickBooks Self-Employed (with or without ALOEwerx services) it allows you to directly connect your accounts to your bookkeeping ledger.

You can connect any credit cards or bank accounts that you would use for business.

That way whenever you use a credit card or bank account it will automatically record in your ledger without manual entry.

This is helpful in validating the accuracy of your books and saves time. A crucial thing for self-employed bookkeeping.

3. Personal vs. Business expenses

It’s important to distinguish between personal and business expenses – not doing that could be one of the most serious mistakes a self-employed can make.

When you use a credit card or online payment with your bank account it is important to go into your books and label them either personal or business.

QuickBooks Self-Employed will keep the transactions in a holding folder until you go in and review each transaction labeling them personal, business, or both.

If using ALOEwerx the bookkeeper assigned to your business will take care of this for you: tracking your income and expenses has never been more convenient.

It is important for self-employed bookkeeping to keep your business costs separate.That will allow you to compare month to month business expenditures and see trends in your business.

4. Net Income


Just like your business expenses, it is important for self-employed bookkeeping to keep income earned from your business and personal money separate.

You can use the same procedures as you do with expenses so you can match up your expenses on a job with the revenue it produced.

Your net income will be the revenues you received from completing jobs minus the expenses incurred and, of course, any quarterly tax payments – and, in the case of self-employed bookkeeping, some of those are estimated taxes.

5. IRS schedule C reductions

In addition to comparing expenditures per month, by classifying business expenses you can start building up tax deductions. It is often considered one of the greatest benefits of self-employed bookkeeping.

Certain business expenditures can be used as tax reductions on your IRS Schedule C.

Even though there are things you can do yourself (such as keeping receipts from purchases to claim tax return), this can be confusing to the most.

So, having an accountant do it for you through ALOEwerx will make sure you are getting the most tax savings possible.

6. Quarterly Federal Tax Payments


When you’re self-employed you have to calculate your quarterly federal tax payments because you don’t have an employer taking it out of your paycheck.

It is important that this aspect of self-employed bookkeeping is not neglected.

Not having an accountant is by no means an excuse for not paying those on time, so if you work independently, be careful not the pay the penalties.

How to calculate quarterly (estimated) taxes?

Using the instructions in the forms, a freelancer may do it himself, but those tasks tend to be time-consuming. And self-employed bookkeeping is all about using the resources efficiently.

Online software can help with this but your time should be better spent.

ALOEwerx will take care all your tax needs from just $35 a month.

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