3 Things You Should Know About Your Self-Employed Clients

Chances are you have Schedule C clients. Whether you call them solopreneurs, freelancers, independent contractors or something else, everyone within this growing self-employed workforce has one thing in common: they work for themselves. As a result, they have unique tax and accounting needs that set them apart from both your business clients and your personal clients.

It’s time to help your self-employed clients Banish the Box.

According to a 2014 study performed by Freelancers Union, more than 40 percent of the U.S. workforce will be contingent by 2020. For the 3.2 million self-employed who are a part of the rising on-demand workforce, a recent Intuit survey found that 46 percent want to be self-employed in order to control their own schedules, and a resounding 91 percent enjoy the freedom of choosing where, when and how they work.

As the self-employed market grows larger, the number of Schedule C filers who come into your office looking for advice and help come tax time will only increase. This kind of market growth offers a once-in-a-generation opportunity to hone in on a new category: you can become an expert at identifying opportunities to capture more deductions, better prepare your clients for taxes, and even consider changing or adjusting your services to better serve your current self-employed clients and reach more prospects.

Let’s break it down a bit further and talk about three of the key things that you need to know about your current (and prospective) Schedule C self-employed clients.

#1: They Need Your Tax Advice

Your Schedule C clients live and work in ways that are different from your standard 1040 clients, whose sole income comes from a standard W-2 job. As such, they have a very different tax situation that, for many, can feel a bit scary.

For starters, a lot of people making self-employed income don’t understand the tax liability that goes along with making self-employed or 1099 income. Have they set enough money aside each month to pay their quarterly estimated tax? Are they prepared to owe self-employment taxes in April? Moreover, do they have any idea where they stand financially each month? Many don’t.

Taxes and banking can feel like a mystery to wedding photographers, Uber drivers, hairdressers and freelance professionals. This presents a big opportunity for you to counsel and advise these types of clients throughout the year. Not only will they appreciate gaining a greater understanding of their tax obligations and having better visibility into their income and expenses, but you’ll also solidify your role as that indispensable sidekick that they simply cannot live without. Bonus: you’ll also likely see an uptick in referrals from these happy clients.

#2: They are Mobile

The next time you walk into your local coffeehouse, take a moment and look around. You’ll likely see a lot of people meeting up to talk, a few business meetings, and a whole slew of self-employed freelancers or contractors getting things done on their laptop, mobile phone and tablet. As they sip their coffee, they may be sending an important email to a prospect, completing a project they were assigned or building their portfolio of work completed.

The point? We live in a mobile society where corded phones are scarce and most things can be done with a click or a swipe. For self-employed clients who don’t spend their days in a typical office, providing services and advice to them while they’re on the go, can make all the difference in the world to their financial health. Here are two ways to meet them where they’re at:

1. Move your clients to financial software that is online and has a mobile interface. Self-employed workers handle their banking in real-time while they’re mobile, so it’s important that the software they use is as flexible as their schedule.
2. Ensure your website is optimized for phones and tablets; for example, downloading an IRS form from your website or providing access to your portal should be made available on any device.

While face-to-face meetings will always be beneficial, working with your clients online can help keep you connected with those on-the-move clients who aren’t always able to come in. Plus, you might be able save some time or escape your desk for a little longer each day.

#3: Many Use a Single Bank Account for Business and Personal Expenses

Self-employment, itself, can be complicated, so it’s no surprise that people who hold these kinds of jobs like keeping things simple in other parts of their lives … but simple can sometimes come at a cost. Take banking, for example. Self-employed individuals will often use the same bank account, and even the same credit cards, for their personal and business expenses. This gets especially tricky come tax time, when they come to you with messy shoeboxes full of receipts and commingled bank records. While the first solution would be to push them harder and make them get a business-specific bank account, it’s also a good idea to help those clients who simply won’t budge find a solution to quickly categorize their expenses, as they are made.

Why does this matter? As you know, when populating a Schedule C form, one of the fastest ways of ensuring that all of their data is accurate for tax filing is referencing a P&L that clearly shows personal versus business expenses, as well as business expenses broken down by category. Having a comprehensive log of the miles they drove for business is also a big help. If these expenses are not separated or the miles simply haven’t been tracked, either you or your clients will likely have to do a line-by-line review and reconciliation against their receipts and bank account, and we both know how long and frustrating this process can be. The worst part? Clients might end up missing out on some big deductions, and your margins may end up being smaller than you’d want them to be.

While good habits and diligent record keeping are king, having an efficient solution that makes staying organized easier for your clients can turn them into less of a headache and increase your value to them as a trusted advisor.

Try QuickBooks Self-Employed

As you know, tax preparation for self-employed clients comes with its fair share of challenges. That’s why Intuit created QuickBooks Self-Employed, a product that helps Schedule C clients Banish the Box simply and easily. With automatic mileage tracking, the ability to separate business and personal transactions with a single swipe, and an easily exportable worksheet with their P&L and tax details (summarized, broken out by quarter and separated by Schedule C category), QuickBooks Self-Employed aims to make self-employment tax prep easier for both you and your Schedule C clients.

Today’s self-employed workforce wants mobility and agility, and wants to know that their tax professional is guiding them to efficient, workable solutions. If you have always relied on QuickBooks Desktop and QuickBooks Online for your accounting and tax prep, or if you have Schedule C clients who are still bringing in that pesky shoebox each April, then take a look at QuickBooks Self-Employed and see how much easier it can make you and your clients’ lives.

2 responses to “3 Things You Should Know About Your Self-Employed Clients”

1. 

   Hi Ms Patel,
   I have a client who is a Clergy and started working since 2008 and was exempt from paying self employment taxes now he decided to pay back his self employment taxes from previous years. How many years is he allowed to pay back? He is willing to pay from 2011 to 2015, can he do that? Thanks in advance for your help.
   Rene
   • 

     Hi Rene, please visit the Accountant’s Community to receive answers to tax-law-related questions from your fellow tax professionals. Thanks! https://accountants-community.intuit.com