8 best tax and accounting software for self-employed & freelancers
One of the best parts of being a freelancer is that you can handle your financial tracking and reconciliation or create invoice templates in any way you want. The downside is that you'll also be managing your self employment taxes, something that many self-employed business owners don't have a lot of experience dealing with. The good news is that it's now easier than ever for anyone with an internet connection to get help and handle their taxes and bookkeeping tasks like a pro.
What should you know before getting started? For one, it’s much easier to do things right from the get-go, rather than try to make sense of many months of receipts and invoices. Since it can be difficult to determine just what your needs are at first, however, it might be beneficial to try out a few different solutions to see what feels best. While many of the software products on the market offer the same functionalities, the look or feel of an app may be all you need to feel at home.
If you’re not currently using software to run the money side of your freelance business, it’s time to get started. Check out our list of the top tools all freelancers should check out when making sure their money matters are in tip-top shape!
Accounting software for self-employed & freelancers
Before you can even begin to think about filing taxes, you'll need proper accounting of every expense and wage you've had for the year (so you can identify all expenses that can be deducted from your taxable income). While it's possible to go back through all your bank and credit card statements when taxes are due, it's much easier to plan from day one to keep good records with innovative accounting software solutions. You don't need a degree or even much experience to make these options work for you. See which ones are most popular among today's freelance professionals.
1. Bonsai tax
What list would be complete without our own service included? Designed to be the all-in-on solution for today’s freelancer, Bonsai lets you import all your expenses and keep track of everything. No need to switch from what platform to the others, login to your Bonsai account and keep track of all your proposals, contracts, revenues, and expenses!
Did you know that you can use Bonsai for accounting? Or that Bonsai can help you be prepared for self-employment tax by providing tax estimates, filling date reminders, and identifying your tax write-offs?
Let's see how that works. First, head to your main Bonsai dashboard and have a close look on the left side - we'll be working with the accounting and taxes sections. First click on "Accounting".
Inside the accounting section, you'll see a breakdown of your income and expenses. Both can either be automatically imported from your bank account, or manually added. Work you got paid for via Bonsai will also be registered here.
Make sure this section is properly filled in and click on "Taxes" next.
This is where the magic happens: Bonsai will do all the calculations for you, and we'll provide you with an overview of your tax estimates, a list of tax deductions you can use for the upcoming tax season, and reminders for all the upcoming filling dates.
Simple, right? If you're ready to check out Bonsai and explore all the features, go ahead and sign up for the free trial!
2. GoDaddy Bookkeeping
Formerly Outright, this is among the most popular tools for independent contractors. An all-in-one time tracking, billing, invoicing, and reporting tool, the GoDaddy Bookkeeping web-based service makes it easy to go from finished client project to Schedule C. It can also tell freelancers at a glance where they stand for the quarter with taxes owed. At a price of less than $12 a month, its recurring subscription model fits most budgets.
Preferred by over 4 million business owners worldwide, Intuit’s QuickBooks software can be used by freelancers for as little as $5 per month. The beautiful interface and integration with most major banks, as well as tools like Shopify and PayPal. It’s also easy to keep track of expenses on the go with their mobile “photo” feature that allows for digital tracking and categorizing. Even the most basic plans use the same proprietary tech that is loved by professional bookkeepers using the more advanced plans.
This cloud-based accounting solution for business owners has earned the praises of notable entrepreneurs such as Pat Flynn and Roman Mars. Designed to help busy freelancers save hours of time each year, FreshBooks is a mobile-friendly solution that boasts 4 million active users. It's powerful enough for big agencies but available as a more modestly-priced freelance plan; pay just $15 for the lite plan after a 30-day free trial.
5. Wave Accounting
Not sure that paying for a monthly plan is for you? The unique difference with Wave is that you pay as you go. No monthly minimums are needed for this cutting-edge billing, invoicing, receipt-scanning, and expense-tracking tool. Wave makes its money by processing all major credit cards used to get you paid. If you don’t process any payments in a month – you pay nothing!
Tax software for freelancers
Do you know the minimum amount you need to earn before you must file taxes? Unlike other Americans, who can avoid filing if they fall below certain thresholds based on filing status and age, all freelancers or self-employed business owners who earn more than $400 of any income in a year must file. The chances are excellent that you'll have to handle your own form filling and filing and get everything in on time with the IRS – regardless of how successful you feel like your freelance business was in 2017.
While you can hire an accountant or tax professional to complete and file your taxes each year (or even each quarter), most of the tax needs of the average freelancer can be handled with many of the small business software products on the market. In fact, most have been updated with freelance-focused topics, and their help sections have extensively addressed the concerns of a typical independent contractor – regardless of your industry.
Assuming you have a detailed record of all of your income and expenses for the year, answering the questions in most software services will be simple. Remember, as a freelancer, you'll have more forms and calculators than the average filer, so expect to pay a bit more for small business versions of the most popular products. It's worth the extra cost, however. The savings you can realize over having a tax preparer do it for you is between $100 - $700 a return!
The market is continually adding new players to the DIY tax game, but the same major companies have held the lead. While it's not recommended to try out a company that's entirely new for you, most of the best-known brands have earned a solid reputation for freelancers of all financial skill levels. The most popular and reliable options continue to be:
Owned by financial products powerhouse Intuit, TurboTax is one of the most popular and reliable tax products on the market today. Available as a download or CD, many freelancers also opt for their online web service, which lets you fill out your taxes and see what you’ll owe (or get back) before you commit to filing. You only pay if you file, and the cost for the federal return product is between $89 – 120. State returns are extra. (Note: If you choose the CD or downloadable option, it’s easy to import last year’s info for even speedier filing.)
2. H&R Block
Made famous by their brick-and-mortar shops, freelancers can now use H&R Block’s trusted tax services from the comfort of their own home. The Self-Employed version of their online software starts at $75, plus extra for state returns and optional review of your return from a tax professional. In addition to containing all the forms a freelancer would need (such as Schedule C), there is a unique transfer function to help Uber drivers and any businesses who use Stride in transferring information from their work records directly to their tax forms.
Known for its free filing option for the simplest of returns, TaxAct now has a suitable software option for freelancers. For less than $45 (the cheapest in the industry), independent contractors can maximize deductions and file the forms for free – with an additional charge for state forms. Choose to download the software or use the program online.
Save time by investing
It takes both pieces – accounting and tax filing – to ensure a stable financial footing for independent contractors. Even if this is your first year handling taxes on your own, it can be made much simpler with the right tool. Whether you choose to use a mobile app, online program, or downloadable software, the features of today's tax and accounting products are intuitive enough for almost every freelance business need. Save money by doing your accounting and filing and put the extra toward investment in your freelance career!
Start tracking your expenses, identifying tax deductions, and estimating your quarterly taxes with Bonsai by signing up for a free trial today.