If you are a freelancer or independent contractor, you’re more than aware of the lack of accounting options out there. Most programs that say they are “freelancer-friendly” end up falling short on their promises. After all, the needs of a freelancer (accounting-wise), are nothing like that of a small business owner. Freelancers have special concerns when it comes to taxes and most freelancers are struggling with the fact that they need to separate business from personal – unless you are one of the few with your own checking and savings account.
So, how do you really know if a program will meet the needs of your freelancing? Simple. You just need to know what features to look for first.
Schedule C Categories
Schedule C is the form a freelancer will file with his or her taxes – since most freelancers will file their business taxes as part of their personal income tax return. The IRS has specific categories used in their Schedule C and these are what you need to categorize your expenses as so that you can input them quickly into your tax preparation software.
Not all accounting programs have Schedule C-specific categorizes; instead, you would need to create them yourself. There are, however, a few programs that automatically classify expenses based on the Schedule C – and these are programs you want to use. You’ll also want to look for programs that print out a Schedule C so that you can input it easier or hand it over to your accountant.
Estimated Quarterly Tax Payments
Estimated quarterly tax payments to the IRS – the bane of all freelancer and independent contractors out there. You have to pay them, and pay them on time. But, calculating them and adjusting those calculations as your income during the year increases or decreases is daunting – and let’s be real…none of us bother.
A good software will do the calculations for you and update them in real-time – so as your income increases or decreases, your estimated quarterly tax payments take notice. Even better, consider a software that doesn’t just calculate it, but also helps track payments and even lets you pay through the software.
PayPal or Stripe Compatibility
Most freelancers and independent contractors will not pay merchant fees or collect payments via check. In fact, most rely on programs like PayPal or Stripe to collect payments from customers. Having a software program that allows you to create an invoice and then collect a PayPal payment – without having to divert away from the program – is great. That way you can still get credit card payments, but without excessive merchant fees.
Freelancers often have to place bids on jobs and that requires official, professional-looking estimates. Not all programs out there for freelancers have estimate capabilities – and we couldn’t tell you why if we tried. The ideal program will have the ability to generate a quote or estimate and even allow you to transform that into an invoice if the client chooses to hire you.
Time Tracking – Not Just Timesheets
A freelancer or contractor may have to bill by the hour for some projects – so simple timesheets aren’t enough. Instead, you need to find a software program that has time-tracking built in. That way you can track your hours to a project and automatically generate an invoice without having to worry about transporting it all from a third party app.
We know it’s hard to find freelancer-friendly accounting programs – trust us, we’ve tried. But, the good news is we’ve tested them, tried them and some of our editorial staff even use these programs themselves. If we had to name a few (and we’re gonna), we suggest trying QuickBooks Simple Start, GoDaddy Online Bookkeeping, WorkingPoint and Freshbooks first. Each of them offer the features above (or a mixture) and provide you with the best up-to-date accounting.