As someone who was a small business accountant for over 10 years, I’ve had a lot of experience with Intuit’s QuickBooks software. And to be honest I never really liked QuickBooks. The desktop software was clunky and geared more towards inventory-based businesses.
But as the years have progressed so have the offerings from different Intuit programs. Now they offer QuickBooks Online and a newer QuickBooks Self-Employed for small business owners. Both of these are more innovative with features that have evolved with how we do business today.
As freelancers we have a lot of options to choose the best accounting software, from FreshBooks to GoDaddy Bookkeeping to Wave and now QuickBooks Self-Employed. Here is my honest review of QuickBooks Self-Employed, and how you can use it to keep both your personal and business finances organized and tax-compliant.
What is QuickBooks Self-Employed?
You’re likely already familiar with the traditional QuickBooks Online, so what makes QuickBooks Self-Employed different? Well, it’s basically a simpler version of QuickBooks Online with a very specific focus on small businesses and self-employed individuals.
As a sole-proprietor you probably mix your business and personal transactions interchangeably, and since you are your business (at least for tax purposes) this fact can get a bit messy at tax time. QBSE tries to provide a solution to this problem.
Speaking of taxes, QBSE helps you estimate and pay your quarterly taxes, which is not a common feature among small business accounting software, so it makes QBSE especially appealing.
It automatically imports your transactions from any linked bank accounts or credit card. You can then categorize them in pre-populated Schedule C categories, making it super simple to print reports and prepare for tax season.
QBSE is a web-based app and iOS app that you can access anywhere you have an internet connection.
Here’s a brief snapshot of the benefits and features QuickBooks Self-Employed:
- Great for commingling personal and business transactions
- Securely and automatically imports transactions
- Categorizes income and expenses for Schedule C
- Accurately calculate and pay quarterly estimated taxes
- Track business profit and loss for the last 6+ years
- Record business miles to and from client meetings
- Print off complete tax summary and other reports
- Costs $4.99 per month (and is a deductible business expense)
How to use QBSE as a freelancer
If you’re like me, and you’re not sure if QBSE will work for your freelance business, they offer a free 30-day trial so you can test it out and see if it works for you. No stress!
1. Link your bank and credit card accounts
When you first get started with QuickBooks Self-Employed you’ll be prompted to link your bank accounts. In the event you use Mint.com you can import all those transactions for the entire year.
Intuit owns QuickBooks, TurboTax and Mint so it’s super easy to bridge that gap. And it won’t affect your Mint or TurboTax accounts, so you can still use them for your everyday personal finances.
QBSE syncs with all the major banks like Capital One, Chase, Discover as well as PayPal, and other credit card accounts. You can also add or remove accounts later and it will import all those transactions for the past year.
To link your bank account, just type in your bank’s name in the search field, enter your login information and select the correct accounts. The whole process only takes about 30-45 seconds.
2. Categorize business and personal transactions
Once your transactions are all imported you’ll have to spend a good bit of time categorizing them. All categories are pulled from Schedule C which is nice because you won’t have to reorganize them when tax season comes around and your accountant asks for a report.
Here’s a list of the Schedule C categories that you must use when filing your taxes as a sole-proprietor and self-employed individual.
One time-saving feature is that you can create Transaction Rules so when a particular vendor expense clears your bank, or you deposit a check, it will always be categorized the same way. Depending on how many transactions you have each month, this can save you a ton of time!
The one drawback that I’ve found, however, is that you can’t add different categories if you want to customize your own transactions.
3. Set up your personal tax profile
By clicking the Settings button in the top right-hand corner you can access all the features that QuickBooks Self-Employed offers, including your tax profile.
Filling this out will enable the software the more accurately calculate quarterly taxes based on whether or not you’re Married Filing Jointly or Single, as well as how many dependents and exemptions you’re claiming.
This is the first accounting software I’ve seen that allows for such an accurate calculation of quarterly taxes. Most of the time you have to set up an appointment with your accountant to personally calculate your estimated tax payments to get a figure this accurate. No more overpaying for your QETs come tax time!
4. Export transactions and create reports
Once you’ve categorized your income and expenses, and set up your tax profile, you can then create and print reports, or export and download all the transactions to a spreadsheet CSV file. This can then be shared with your accountant or kept for your records at the end of each month.
QuickBooks Self-Employed offers three types of reports:
- Profit and loss – This report summarizes income and expenses, so you can see if you’re in the green or red. It’s also called a P&L or income statement.
- Tax summary (PDF) – This is a simple self-employment ledger that summarizes your income minus deductions to get your taxable business profit. It then gives totals for spending and deductions in Schedule C and healthcare categories.
- Tax details (Excel) – This tax report contains a similar overview of information, like the Tax summary, but also gives detailed transactions by category.
5. Record business miles for meetings
If you’re a freelancer who hosts a lot of in-person meetings with clients, or drives a good distance for work-related projects, then you’ll really like this feature. QBSE helps you save money on taxes by logging and categorizing your business miles for different trips.
Start by adding details about your vehicle, like the make, model and date you purchased it. Then add your mileage based on actual miles or estimated odometer readings. You can then track and log your trips automatically via the iOs app, or add them to your dashboard later.
QuickBooks Self-Employed pricing plans
As I mentioned, you can test out the QuickBooks Self-Employed accounting software for free with their 30-day trial. After that time period, here are the current prices you’ll pay each month.
- Basic: for $4.99 (normally $9.99) a month you can access the basic bookkeeping software that syncs your personal and business transactions, accurately categorize and maximize your Schedule C deductions and calculate quarterly tax payments.
- Tax Bundle: for $11.99 (normally $16.99) a month you’ll be able to access all the basic bookkeeping features in the basic plan, plus have the ability to pay quarterly tax payments online and file your Schedule C taxes online for free.
I personally don’t see the advantage of paying for the $11.99 monthly price since you can already pay your quarterly taxes online for free.
I have an entire Tax Toolkit that breaks down the exact steps. But it may be worth it to you during tax season when you’re ready to file your taxes.
What would make QBSE better?
While QuickBooks Self-Employed does offer a lot great features for freelancers and small business owners, it still feels incomplete. There are several large drawbacks.
It doesn’t have any way of tracking client information, creating/sending invoices or tracking time spent on each project. It offers no in-depth reports for clients, invoicing, time tracking or other features that are vital for freelancers.
You also can’t edit the transaction amounts, so if a client payment is deposited into your bank minus the transaction fee, you won’t be able to record the gross amount or get the deduction for the fee you paid. This can mess up your gross versus net transaction figures and throw off your 1099 amounts at the end of the year.
While QuickBooks Self-Employed boasts the ability to separate your business and personal income, it doesn’t go as far to allow you to categorize them. There are only two income categories: Business and personal, that’s it.
There’s no way to you to distinguish how much you earned from a particular income stream and it doesn’t allow for personal spending categories.
So in essence it’s best used for bookkeeping purposes like categorizing your income and expenses, then prepping for tax time. Nothing more.
Should freelancers use QuickBooks Self-Employed?
The short answer is; probably not. But the longer answer is; maybe.
After testing out QBSE for my own freelance business, I’ve found that it doesn’t work for my needs. But there isn’t an all-in-one program available (at least, not that I’ve found) that will do the bookkeeping and track freelance client information and send invoices.
The one feature that I do think is very appealing for using the QuickBooks Self-Employed software is that you can very accurately calculate and pay your quarterly taxes. Or perhaps track business miles and streamline your Schedule C tax filing.
If you’re hoping to use it for more than that though, I’m afraid you’ll be disappointed. You may be able to use it in conjunction with FreshBooks (or Wave), and piece together your own complete bookkeeping and client accounting software.