Has your company restructured and let you go, only to “hire” you back as an independent contractor?
Did you quit your job to strike out on your own?
Are you joining the freelance economy?
You may not have a choice in your new classification, but you’ll definitely want to make plans to deal with it. If you have a trusted advisor (CPA, bookkeeper, etc.), now’s the time to call them. If you don’t, contact us to schedule a quick call. A 30 minute consultation can help you avoid a panic attack next April.
Do I need to pay extra taxes?
An employer is no longer responsible for your income tax withholdings – you are. You can set aside a certain amount each week/month/quarter to cover your budgeted taxes, or if you’re married, you may want to have your partner withhold more from their check to cover what you’ll owe on your new earnings.
Talk to your tax professional about how much you should budget based on what you expect to earn. If you don’t have a tax professional, call us today for a referral!
What do I need to do differently?
If you drive for your work, your mileage may be deductible. Trips to and from your regular place of business aren’t usually deductible, but if you drive to meet clients or purchase supplies, you’ll want to track your mileage.
And by “track” I don’t mean jot down that you went to Staples last week. I mean write down your beginning odometer reading, the date, where you’re going, the purpose of the trip, and finally, the ending odometer reading. If that all sounds tedious, try a mileage app like Milebug or MileIQ. You can easily export a mileage report.
What about record-keeping?
Third, depending on what kind of work you’re doing, you may not have many deductible expenses. But if you do, consider using an accounting program to track them so you’re not digging through shoeboxes next year.
With QuickBooks Online, for as little as $10 a month for their self-employed version, you can keep track of your income and expenses securely in the cloud. Contact us today for help setting up your file. We can also perform a monthly or quarterly review of your files.
I might need some help here.
If thinking about your new status as an independent contractor makes you want to stick your head in the sand, call us at 206-219-6455. We’ve helped countless contractors and entrepreneurs establish a bookkeeping system, budget for taxes, and grow their businesses.