I worked for decades as a contractor in IT. Briefly, what I needed as a
single entity was pretty simple, and fell well within the capabilities
of GnuCash.
I assume here you work as a contractor essentially in a 'do the work,
get paid' mode. Whether you operate on a b2b direct mode or in a 1099
mode makes some difference, but as I found that difference was mostly in
the fine details. As a b2b operation, my cash flow went to a business
account, which then paid me and did all the deductions; that made two
gnucash files, one for the business and one for me. That was a minor
complexity, but dealing with the business side did cost me time and
effort. The business side then deals with things like managing
retirement contributions (beyond payroll deductions), quarterlies, and
so on. Really straightforward. This does have the advantage of various
tax provisions, although not as many as I thought; most of those
provisions applied to me individually, with less number farming.
Eventually I found it simpler to fall back to the simpler mode of
working through a 1099 relationship, sometimes directly to a client but
more often through headhunters. I worked, got a signed timesheet
(usually), submitted and was paid. So long as you can report your wages,
you can track as much of the payroll detail as you like. I did rely on
the 1099s at tax time as my final total arbiter, which meant that all I
really had to track for myself was the cash I got, which I applied as
income to (from) a bank account. It's possible to track all the detail
of the payment/deduction stream if you like, as well, although I found
that unnecessary to my purposes or comfort. After that, it's just a
matter of tracking expenses to whatever level of detail is comfortable
to you, given the tax implications of some things being more critical
than others.
One point might be worth considering. When I worked for multiple
clients, either sequentially or simultaneously, I did break out both
income and expenses as subaccounts for each of them. It adds marginally
to the work of record keeping, but everything rolls up cleanly.
There are only a few areas that mattered for me as a contractor:
travel/entertainment, auto expense, and general business expenses. Each
of these are fully covered in IRS documents. I simply made them expense
items, with whatever detail was required. I kept receipts for all auto
dollars, since they did matter to my bank balance, but frankly I came
out better at the end of it using a standard mileage deduction. Same for
t&e, using per diem standards. If I had used a portion of my domicile as
an office, I would have put that under the general business expense
object, and so on. It's that simple.
One item that GnuCash does not manage well is mileage. I tracked it in a
small notebook in my car, noting that there are various phone apps that
might easily suffice (my inner luddite does not care for apps). I did
move my numbers into a spreadsheet for an annual summation, which was
not an issue. I also tracked days away from home in the same manner.
There are IRS rules involved here which require basically showing this
material in a recognizable contemporaneous format, if they ever ask
directly (they never asked me).
It helps to allow a 'petty cash' expense account, where cash
expenditures can be marked for business purposes with a split.
This very personal sort of accounting fits within GnuCash very neatly.
At tax time, my necessary numbers were mostly available by viewing the
appropriate accounts. I suppose I could have marked everything for tax
linkages, but it just was not that difficult. And my federal return has
consistently included forms 1040 and 2106. Boom, done. That simple level
of structure in GnuCash covered the basic numbers, and the outstanding
calculations took less than an hour. It's a bit more difficult to sort
out multiple state returns (the CA version is particularly entangled),
but that's where the subaccounts per client can shine. Most of them
depend on primary items from the 1040, but there can be some business
expenses that are either part of some other sum, or come from the 2106.
Of course you'll note that most of this too-long presentation has little
to do with GnuCash, and most to do with how your data can be organized.
I wish I'd found Gnucash years earlier.
hth
=========================================================
On 7/27/2017 1:28 PM, Buddha Buck wrote:
I seem to be transitioning from full-time employment to software dev
contracting. I don't know really what's involved in that, accounting-wise,
in the US.
Does anyone know of any resources for how to do the proper accounting as a
contractor in the US, especially using GnuCash?
Thanks,
Buddha
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