Have you noticed how everything in the world these days is speeding up? You can now order your coffee via app and have it waiting for you at the store. You can fast forward through commercials, so you don’t have to wait to see your favorite TV show. Our society has become about instant gratification on demand. In fact, there’s now a new classification of instant workers who satiate the need for instant solutions to our needs via technology.
But along with a new classification of on-demand workers comes new bookkeeping concerns. If you operate a business that’s all about instant results, such as an Uber driver, then I’m talking to you. Technically, on-demand workers are considered independent contractors, but there are some things you should think about when it comes to your taxes:
- WITHHOLD TAXES – Employees who work for a corporation or for someone else have their taxes withheld automatically. If you are an independent contractor, you’re responsible for withholding your own taxes, both income tax and self-employment taxes. Self-employment taxes include withholding of Social Security and Medicare for individuals working for themselves. If you don’t withhold taxes via a 1040-ES, you could face penalties and heavy fines from the IRS.
- PAY YOUR TAXES - Just because an employer doesn’t withhold your taxes, doesn’t mean you can’t pay them yourself. You should be making estimated tax payments bi-monthly or at the very least quarterly. If you are having a hard time estimating the amount, call your bookkeeper or accountant. If you don’t have one, then give us a call and we’ll do the estimating for you. Remember, if you don’t pay up, the IRS could come after you.
- SEPARATE PERSONAL EXPENSES - If you are an on-demand worker, make sure you keep your work and personal expenses separate as much as possible. For example, if you operate an on-demand delivery service, but use your vehicle for personal use too, don’t forget to log your mileage. If you’re renting out your home for more than 15 days, you’re required to report rental income and any expenses to the IRS. You’ll want to deduct the portion you use for business, so good record keeping is key.
- SET FINANCIAL GOALS – If you operate an on-demand business, make sure you set financial goals. How is your business doing? Are you making money? How can you get your company to grow? At Brigade Bookkeeping, we run P&L or Profit and Loss statements for our clients regularly. We can do the same for you. Knowing your numbers and your goals for the future can help grow your business and bring you peace of mind now.
On-demand businesses are growing every day. If you operate this kind of business or are an independent contractor, make sure your books are in order. It’s the first step to operating a successful business, but easy to lose sight of when you don’t have an accounting department doing it for you. If you need help, don’t hesitate to e-mail me or give me a call. Brigade Bookkeeping can be your secret army of bookkeeping pros!