![]() ![]() This means that the transactions and balance on your bank statement needs to match your records–whether that’s a spreadsheet, a paper-based bookkeeping system, software, or cloud computing accounting.Īlthough not legally required, software or cloud computing accounting does have its perks. This way, you can easily match your bookkeeping records to your bank statements.Īt the end of each month, your bank statements need to be reconciled. To keep your books organized and avoid inaccuracies, freelancers should strongly consider opening a separate business banking account once money starts coming in. Simple paper folders and excel sheets can work and are perfectly legal as long as they are accurate, complete, and thorough. There just needs to be some way of tracking all the money going in and money going out. The government recognizes that people sometimes have to spend money in order to get a business up and running, and there are tax breaks as a result.įailing to keep accurate documentation and proof of these business expenses could result in actually paying more money during tax time.įreelancers Are Not Required to Have Fancy Accounting SoftwareĪlthough freelancers need to keep accurate records of their daily financial transactions, depending on the service, in-depth accounting software may not be necessary. Membership dues, business-related training, supplies, and business dinners are some fees that could possibly be deducted when taxes are filed. The reason for this is that many of these start-up costs can be deducted during tax time. The moment that a freelancer incurs a business-related expense is the moment record-keeping should begin. Organizing all documents and financial transactions in chronological date order is the best way to do this.īookkeeping Starts As Soon As Money Is Spent However, they can audit a business as far back as six.Īll receipts, customer invoices, and bank statements related to your freelance work should be filed away and kept for six years at the very least. ![]() The IRS recommends that businesses keep records for up to three years. However, they are responsible for keeping track of all of the bookkeeping, just as a business is. Now that the basics are out of the way, here are some other things you should know about bookkeeping as a freelancer:įreelancers don’t have to be a registered business to have the same accounting responsibilities as a business owner.Īs sole proprietors, freelancers can work and get paid under their own name. So if you’re a freelancer just starting out, make a commitment to keep your bookkeeping up to date. If you hire someone to sort out your bookkeeping at the end of the year, you will be charged many billable hours to sort out a giant box of receipts and invoices. Inaccuracies will be harder to pinpoint, and you need accurate records when you file your taxes. It’s important to note, while you CAN do your bookkeeping once a year, this doesn’t mean you should.ĭoing your bookkeeping infrequently can result in inaccuracies and losing important documentation that you may need as proof of that financial transaction (which can translate to losing money if you can’t prove a deduction.) If you’re new to bookkeeping, read and reread that definition as many times as necessary until you have a basic understanding. ![]() Bookkeeping can be done as frequently as daily or as infrequently as once per year.” ![]() It is part of a business’s overall accounting process. Nerdwallet has a great definition: “Bookkeeping is broadly defined as the recording of financial transactions for a business. need to know.īefore we get to that, it’s important to define what bookkeeping is. However, even if you choose to outsource your bookkeeping, there are still some things freelancers based in the U.S. Waiting until the end of the year to perform bookkeeping will also leave you feeling stressed and overwhelmed.īookkeeping can be learned, and if not, you can always outsource it. ![]()
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