Bookkeeping for Self-Employed: Simple Systems for Solo Businesses

When you’re self-employed, you wear every hat—including bookkeeper. But keeping the books doesn’t have to consume your time or stress you out.

Here’s a simple, effective approach to bookkeeping for self-employed individuals.

The Self-Employed Bookkeeping Reality

You’re Both Boss and Employee

Being self-employed means:

• No employer withholding taxes
• No HR department managing payroll
• No accountant keeping the books
• Everything financial is on you

But it also means flexibility and control—if you set up the right systems.

What’s Different for the Self-Employed

No automatic tax withholding: You must set aside and pay taxes yourself.

Mixed personal and business: Easier to accidentally blur the lines.

Variable income: Unpredictable cash flow requires planning.

Simpler structure: No employees or complex operations (usually).

Schedule C: Your business goes on your personal return.

The Minimum Viable Bookkeeping System

What You Actually Need

For most self-employed individuals:

1. Separate bank account
2. Simple expense tracking
3. Income recording
4. Receipt storage
5. Basic reports
6. Tax payment system

That’s it. Nothing fancy required.

Account Separation Is Non-Negotiable

Open a business bank account. Use it exclusively for business:

• All income deposits here
• All business expenses paid from here
• No personal transactions

This single step solves half of bookkeeping headaches.

Basic vs. Full System

Minimum viable (solo, under $50K revenue):

• Spreadsheet for income and expenses
• Receipt photos in a folder
• Separate bank account
• Quarterly tax estimates

More robust (growing, over $50K):

• Accounting software (QuickBooks, Wave)
• Bank feed connection
• Receipt capture app
• Mileage tracking app

Start simple. Add complexity only when needed.

Income Tracking

Recording Every Dollar

Track all income:

• Client payments
• Platform payouts (Stripe, PayPal, Venmo)
• Cash payments
• Other income sources

For each income entry:

• Date received
• Amount
• Client/source
• Description
• Invoice number (if applicable)

Multiple Payment Sources

If you receive payments through various channels:

• Bank transfer from clients
• PayPal business
• Stripe payments
• Venmo for business
• Cash

Each needs to be tracked and eventually reconciled.

Dealing with 1099s

You’ll receive 1099s from:

• Clients who paid you $600+ (1099-NEC)
• Payment platforms (1099-K)

Important: Report all income, even if you don’t receive a 1099.

Keep records to reconcile 1099s with your actual income.

Expense Tracking

What’s Deductible

Common self-employed deductions:

• Home office (space used exclusively for business)
• Office supplies
• Business phone and internet (business portion)
• Software and subscriptions
• Professional services (accountant, lawyer)
• Marketing and advertising
• Travel for business
• Meals with clients (50% deductible)
• Vehicle expenses (mileage or actual)
• Health insurance premiums
• Retirement contributions
• Professional development
• Industry publications and memberships

Tracking Methods

Spreadsheet method:

• Simple and free
• Columns: Date, Vendor, Amount, Category, Notes
• Add rows as expenses occur
• Summarize totals by category

App method:

• Use Wave, QuickBooks, or similar
• Connect bank account
• Transactions import automatically
• Categorize as they appear

Receipt capture:

• Photograph receipts immediately
• Use Dext, Expensify, or simple folder
• Never lose a deduction to a faded receipt

Category Simplicity

You don’t need 50 categories. For most self-employed:

• Advertising/Marketing
• Office Supplies
• Software/Subscriptions
• Professional Services
• Travel
• Meals
• Phone/Internet
• Vehicle/Mileage
• Education/Training
• Miscellaneous

Match categories roughly to Schedule C lines.

Home Office Deduction

Who Qualifies

You can deduct home office if:

• You have a dedicated space
• Used regularly and exclusively for business
• It’s your principal place of business (or where you meet clients)

A corner of the dining room doesn’t count. A dedicated office does.

Simple Method

Deduct $5 per square foot, up to 300 square feet ($1,500 max).

Example: 200 square foot office = $1,000 deduction

No complex calculations required.

Actual Method

Calculate actual percentage:

1. Measure your office space
2. Divide by total home square footage
3. Apply percentage to housing costs

Example:

• Office: 200 sq ft
• Home: 2,000 sq ft
• Percentage: 10%

Apply to:

• Rent or mortgage interest: $12,000 × 10% = $1,200
• Utilities: $3,000 × 10% = $300
• Insurance: $1,200 × 10% = $120
• Total: $1,620

Compare methods and use whichever is higher.

Vehicle Expenses

Mileage Tracking

Track business miles driven:

• Date
• Starting point and destination
• Business purpose
• Miles driven

Mileage apps: MileIQ, Stride, Everlance

Standard Mileage Rate

IRS rate × business miles = deduction

Example: 5,000 business miles × $0.67/mile = $3,350 deduction

(Check current IRS rate—it changes annually)

Actual Expenses

Alternative method:

1. Track all vehicle costs (gas, insurance, maintenance, depreciation)
2. Calculate business use percentage
3. Deduct that percentage of total costs

Generally more complex than mileage rate for similar benefit.

What Counts as Business Miles

Deductible:

• Client meetings
• Business errands
• Travel between work locations
• Professional development events

Not deductible:

• Commuting from home to regular office (if you have one)
• Personal errands
• Mixed personal/business trips (without clear business purpose)

Self-Employment Taxes

What You Owe

Self-employed individuals pay:

• Regular income tax (based on brackets)
• Self-employment tax: 15.3% (12.4% Social Security + 2.9% Medicare)

Example ($80,000 net self-employment income):

• Self-employment tax: ~$11,300
• Plus federal income tax: varies by total situation
• Plus state income tax: varies by state

Quarterly Estimated Taxes

No employer withholds taxes, so you must pay quarterly:

• April 15: Q1 estimate
• June 15: Q2 estimate
• September 15: Q3 estimate
• January 15: Q4 estimate

Underpayment leads to penalties.

The 25-30% Rule

Set aside 25-30% of net income for taxes:

• Immediately upon receiving payment
• Into a separate savings account
• Before you spend it on anything else

This ensures you have money for quarterly payments.

Setting Up Tax Savings

Profit First approach:

• 15% of every deposit goes to Tax account
• Quarterly estimates paid from Tax account
• Leftover stays for year-end taxes

Simple approach:

• Transfer 25-30% of deposits to savings
• Pay estimates from savings
• Adjust as needed based on actual tax liability

Quarterly Routine

What to Do Each Quarter

Month 1 of quarter:

• Review last quarter’s financials
• Pay quarterly estimated tax
• Ensure you’re on track

Month 2 of quarter:

• Regular expense tracking
• Reconcile bank statement
• Catch up on anything behind

Month 3 of quarter:

• Prepare for next quarter’s estimate
• Review income and expense trends
• Make tax projections

The 15-Minute Weekly Check

Once a week:

1. Log business income (if not automatic)
2. Categorize new expenses
3. File any receipts
4. Check outstanding invoices

15 minutes prevents hours of catch-up later.

Year-End Checklist

Before December 31

• Review income for accuracy
• Ensure all expenses recorded
• Make any tax-motivated purchases
• Pay deductible expenses
• Maximize retirement contributions
• Verify mileage log is complete

In January

• Finalize year’s books
• Gather W-9s from contractors
• Issue 1099s (if you paid contractors $600+)
• Collect 1099s from clients
• Organize records for tax prep

Tax Filing

• Complete Schedule C
• Claim all deductions
• Report all income
• File on time (April 15 or extension)

Tools for Self-Employed Bookkeeping

Accounting Software

Wave (free):

• Good for simple needs
• Bank connection
• Invoicing
• Basic reports

QuickBooks Self-Employed (~$15/month):

• Designed for self-employed
• Mileage tracking built in
• Quarterly tax estimates
• Separates personal and business

QuickBooks Online (~$30+/month):

• More robust
• Better if you’re growing
• More features than needed for simple solo work

Receipt Tracking

Phone camera + folder: Simple, free Dext/Receipt Bank: Extracts data automatically Expensify: Good for travel expenses

Mileage Tracking

MileIQ: Automatic tracking Stride: Free option Everlance: Mileage + expense tracking

Invoicing

Wave: Free invoicing QuickBooks: Integrated HoneyBook/Dubsado: Good for service providers

Common Self-Employed Mistakes

Mistake 1: Not Separating Accounts

Using personal accounts for business creates nightmares. Separate them.

Mistake 2: Forgetting to Pay Estimates

Quarterly taxes are required. Penalties for missing them add up.

Mistake 3: Not Tracking Mileage

Mileage is a significant deduction, but only if you have a log. Track it.

Mistake 4: Missing Deductions

Every legitimate expense reduces taxes. Track and claim them all.

Mistake 5: Waiting Until Tax Time

Catching up on a year of books is painful. Do a little weekly instead.

Mistake 6: DIY When Over Your Head

Know when to hire a bookkeeper or accountant. The cost is usually worth it.

When to Get Professional Help

Signs You Need Help

• Revenue exceeding $100K
• Multiple income streams getting complex
• Consistently behind on books
• Tax situation is confusing
• Making expensive mistakes
• Would rather focus on your work

What Help to Get

Bookkeeper: Ongoing transaction tracking, reconciliation, reports.

CPA: Tax preparation, tax planning, business structure advice.

Both: Bookkeeper for monthly work, CPA for annual taxes and advice.

The investment in help often pays for itself in time saved and deductions captured.

The Bottom Line

Self-employed bookkeeping doesn’t have to be complicated:

1. Separate your accounts
2. Track income as it comes
3. Track expenses as they go
4. Save for taxes immediately
5. Pay quarterly estimates
6. Do a little each week

The simpler your system, the more likely you’ll maintain it. Start simple, build habits, and add complexity only when genuinely needed.

Your books should serve your business—not consume it.

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Need help with your self-employed finances? At Profit Path Books, we work with solopreneurs and freelancers to set up simple, effective bookkeeping systems. Book a consultation to discuss your needs.