Top Five Reasons Why Freelancers Need an Accountant in 2023
Every industry employs freelancers. Although their employment gives many individuals freedom across numerous industries, freelancers nonetheless have accounting requirements that they must satisfy.
Should I Report My Freelance Income?
You must report your freelance income, as a freelancer. Copies of Form 1099 will be sent to the IRS by businesses where you’ve performed freelance work throughout the year. This form also asks for information about your earnings from freelancing.
You may require four tax forms, depending on the amount of freelance income you owe and the paperwork you must submit:
- Form 1040
- Form 1099
So, you must declare freelance income if you fall into one of two income tiers. You don’t need to record it as income on Form 1099 if you received less than $600 in wages from an employer.
This income amount will be added to your overall income on Schedule C.
If you earned more than $600 or received numerous Form 1099s, you must report your income differently. To record your income from freelancing, you must:
- Total the earnings reported on all Form 1099s
- Complete Schedule SE and Schedule C on Form 1040
- Fill out Form 1040
Is an Accountant Necessary?
You should understand the advantages of hiring an accountant before deciding whether you need one. Accountants are beneficial in many aspects of paying taxes and reporting revenue. The following are some of the key justifications and advantages of hiring a tax accountant for independent contractors:
- Your financial statements will be examined by an accountant to make sure there are no errors with your finances.
- Accountants and CPAs can offer clients financial advice.
- Other bookkeeping tasks that accountants can handle include creating financial statements, creating reports, and documenting transactions.
Additionally, accountants can assist you in determining whether you are eligible for any tax credits or deductions.
Some remote accounting systems for independent contractors let them submit taxes from other states. For freelancers who need to disclose income, working with a certified public accountant has even more advantages.
Arguments in Favor of Hiring an Accountant
There are many benefits for independent contractors to work with a freelance accountant. There are five reasons you should work with an accountant, whether you’re looking for an accountant or a certified public accountant to record your freelancing income:
- Financial statements can be created by accountants.
- Financial statements can be created and reviewed by CPAs.
- Tax returns can be prepared by CPAs for both individuals and small businesses.
- If a tax audit happens, CPAs can represent taxpayers.
- Whether you deal with an accountant or a CPA, you will save time.
The ability of accountants to create financial statements is the primary justification for hiring one. You can have the data you need to start the income reporting process as a freelancer, but just some of what you need to create your financial statements. You can more easily disclose your freelancing income by working with an accountant.
Financial statements are the second justification for hiring an accountant. Your certified public accountant (CPA) can generate and examine financial statements. So they can check your income statement, cash flow statement, and balance sheet. A financial statement will be used by a CPA to present a more thorough picture of the transactions you’ll need to record income and submit taxes on.
The ability to collaborate with CPAs is the factor that will make you desire to hire an accountant for your freelancing income reporting. For freelancers who can run their enterprises as sole proprietorships, a CPA can prepare tax returns for both individuals and small businesses.
Your time is the justification for hiring an accountant to file your freelance revenue. Time can be saved by working with an accountant or a certified public accountant. Understanding tax laws and being aware of tax credits and deductions may also enable you to make financial savings.
What to Ask Before Hiring a Personal or Business Accountant
You can have several queries to ask an accountant before engaging them for your business or personal use. These inquiries can help you understand more about how a business or personal accountant can assist you while you search for one:
- Do you have any prior experience in my line of work?
- What do you charge?
- What kind of services do you offer?
These inquiries will aid independent contractors in learning more about a potential personal or business accountant. In addition, you’ll discover how to manage your financial data before employing an accountant.
Consult a Professional Experience in Freelance Finances
As a freelancer, you could need tax preparation services for several aspects of your finances. When selecting a potential accountant, keep in mind that freelancing finances aren’t always solid and that there may be other factors to take into account.
To avoid mistakes and proper representation, be sure the accountant you hire is a certified public accountant. For the finest tax returns as the new year approaches, consult a seasoned accountant. For any of your demands about your freelancing financial firm, call our accountants at Your Part Time Accountant.
It’s a great opportunity for freelancers to get ready for their annual tax demands now that the new year has arrived. There is still time to put methods and techniques that a CPA or accountant can use to make the income reporting and tax filing process easier.