Creating an invoice may seem like a straightforward process, but small business owners and freelancers know that even minor invoicing mistakes can delay payments or lead to disputes. A clear, accurate invoice not only helps you get paid faster but also strengthens your professional image and supports smooth bookkeeping practices.In this guide, 1-800Accountant, America's leading virtual accounting firm, walks you through six easy steps to create an invoice that works every time. We also provide a&nbsp;<a href="https://1800accountant.com/blog/contracting-invoice-template" target="_self">free small business invoice template</a>&nbsp;that you can download and personalize to save time and effort. By the end, you’ll have a ready-to-use invoice and know precisely how to bill clients with confidence, contributing to smooth operations.&nbsp;<h3>Key Highlights</h3><ul><li>Learn how to invoice clients by creating and customizing a professional invoice in six easy steps.</li><li>Understand what details to include to avoid payment delays.</li><li>Discover common invoicing mistakes and learn how to avoid them.</li><li>Use our free, customizable invoice template to simplify your workflow.</li><li>Apply best practices that help small businesses get paid faster.</li></ul><h2>What Is an Invoice and Why It Matters</h2>Creating an invoice format for service providers from scratch can be challenging, which is why we offer a contractor invoice sample template that can also be used by freelancers, entrepreneurs, and small business owners.&nbsp;<h3>Definition of an Invoice</h3>Before you learn how to create invoices, you need to know what they are. An invoice is a formal document that's a part of the billing process requesting payment for goods or services you’ve provided. It details services rendered along with payment terms and due dates:&nbsp;<ul><li>What was sold</li><li>When</li><li>For how much</li></ul>Accuracy and clarity are essential because they establish your professionalism and serve as a legal record of your transaction.<h3>Impact on Your Business</h3>Timely and detailed invoices are critical for maintaining a positive cash flow and client trust. Waiting over 30 days typically harms cash flow, so time is of the essence.A well-structured invoice also helps shorten the pay cycle. Professional invoices also:<ul><li>Reduce disputes</li><li>Simplify accounting</li><li>Helps keep your financial records organized for tax time</li></ul><h3>Common Mistakes Small Businesses Make</h3>Many small businesses struggle with:<ul><li>Inconsistent templates</li><li>Missing details</li><li>Vague payment terms</li></ul>Late invoicing or unclear descriptions can result in delays and lost revenue. The key is to create a reliable process and use consistent formats.<h2>Step 1: Download and Personalize the Free Invoice Template</h2>Start with the&nbsp;<a href="https://1800accountant.com/blog/contracting-invoice-template">free invoice template</a>&nbsp;from 1-800Accountant, available in Microsoft Word, Microsoft Excel, and PDF formats. Whether it's invoice creation for freelancers or business owners, this template includes key components and all essential invoice fields, so you don’t have to start from scratch.<img src="https://images.contentstack.io/v3/assets/blt5aaad8b5e90091d6/blt1b9f2e49ff1fa081/690dfc279ff683684ba740a6/Blog_Thumbnail_How_to_Create_an_Invoice_in_6_Steps_asset.png" alt="Blog_Thumbnail_How_to_Create_an_Invoice_in_6_Steps_asset.png" height="auto"/>Add essential information, including your company name, logo, and contact details, at the top. Then include your:<ul><li>Customer's name</li><li>Address</li><li>Unique invoice number</li></ul>You can also customize the color schemes and fonts to align with your brand. Using the same standardized template each time makes your invoicing process faster and more consistent, while ensuring you never omit key information. Whether it's a debit invoice, a credit invoice, a timesheet invoice, or a recurring invoice, our free templates support your ongoing initiatives.<h2>Step 2: Enter Essential Invoice Details</h2><h3>Header Information</h3>Each invoice should clearly display both parties’ details:<ul><li>Your information:&nbsp;business name, address, email, and phone number.</li><li>Client information:&nbsp;full name or business name, address, and contact info.</li><li>Invoice details:&nbsp;invoice number, issue date, and due date.</li></ul>Create a numbering system for tracking (for example:&nbsp;2025-ClientName-001). This makes it easy to organize records and avoid duplicates.<h3>Description of Goods or Services</h3>List each product or service separately and include:&nbsp;<ul><li>A brief description</li><li>Quantity or total amount of hours</li><li>Rate</li><li>Total per line item</li></ul>Be clear and specific about services provided to avoid confusion on your standard invoice. For example, instead of writing "consulting," use "Business strategy consultation, 3 hours."<h3>Payment Terms and Due Date</h3>Define accepted payment methods (such as bank transfer, check, or online payment) and set your invoice date (Net 15, Net 30, etc.). Be sure to mention any late fees or discounts for early payment.Transparency in terms reduces confusion and strengthens client relationships.<h2>Step 3: Calculate Totals, Taxes, and Any Adjustments</h2>Sum up all items, then add any applicable taxes, such as sales tax or VAT. If you’re offering discounts or applying additional fees, clearly display them. A best practice is to display:<table><colgroup data-width='994.3890274314215'><col style="width:45.768%"/><col style="width:14.7335%"/><col style="width:23.8245%"/><col style="width:15.674%"/></colgroup><tbody><tr><td>Item Description</td><td>Rate</td><td>Quantity</td><td>Total</td></tr><tr><td>Business Consulting</td><td>$100</td><td>3 hrs</td><td>$300</td></tr><tr><td></td><td>&nbsp;</td><td>Subtotal</td><td>$300</td></tr><tr><td></td><td>&nbsp;</td><td>Sales Tax (6%)</td><td>$18</td></tr><tr><td></td><td>&nbsp;</td><td>Total Due</td><td>$318</td></tr></tbody></table>Accurate calculations reduce disputes and build client trust.<h2>Step 4: Add Professional and Legal Touches</h2><h3>Branding and Presentation</h3>Your invoice should reflect your professionalism, so be sure to use:<ul><li>Your company logo</li><li>Consistent fonts</li><li>Colors that align with your brand identity</li></ul>Clean, visually appealing invoices stand out and reinforce your business's credibility.<h3>Terms and Notes Section</h3>Use this space for brief notes, such as “Thank you for your business!” or reminders about upcoming due dates and late fees. Contractors can include purchase order numbers or project references for clarity.<h3>Legal and Compliance Considerations</h3>Keep a copy of every invoice for your records. This is a smart bookkeeping habit that helps with tax reporting and audits. If your industry has specific invoicing requirements, be sure to comply with them.For added accuracy, you can rely on&nbsp;<a href="https://1800accountant.com/services/bookkeeping">1-800Accountant’s bookkeeping services</a>&nbsp;to help manage your records.<h2>Step 5: Send the Invoice and Track It</h2>Send invoices as soon as a service or product is delivered. Prompt invoicing helps&nbsp;<a href="https://1800accountant.com/blog/cash-flow-statement" target="_self">improve small business cash flow</a>&nbsp;and enables you to get paid faster. You can:&nbsp;<ul><li>Email a PDF</li><li>Use invoicing software</li><li>Send a physical copy</li></ul>Track when each invoice was sent, note the payment status, and follow up on any overdue balances. More than half of small businesses&nbsp;<a href="https://quickbooks.intuit.com/r/small-business-data/small-business-insights/" target="_blank">wait over 30 days for payments</a>, so tracking and timely reminders are essential.<h2>Step 6: Follow Up and Record Payment</h2><h3>Reminder Process</h3>Create a polite but firm follow-up schedule. For example:<ul><li>5 days past due:&nbsp;Friendly reminder.</li><li>15 days past due:&nbsp;Second notice with payment options.</li><li>30 days past due:&nbsp;Formal notice referencing any late fees.</li></ul>Automated reminders through your invoicing system help maintain consistency and ensure timely payments.<h3>Record Payment and File the Invoice</h3>Once payment is received, mark the invoice as “Paid” and issue a receipt if necessary. File the document, either digitally or in hard copy, for tax reporting purposes. Good recordkeeping helps at year-end and&nbsp;<a href="https://www.invensis.net/blog/invoice-management-best-practices" target="_blank">supports cash flow visibility</a>.<h2>Bonus Tips for Better Invoicing Efficiency</h2>It's important to follow billing and invoicing best practices for small businesses. Utilize these bonus tips to enhance invoicing efficiency and promote smoother operations.&nbsp;<ul><li>Consider using e-invoicing tools to automate repetitive tasks (<a href="https://blog.trginternational.com/e-invoicing-small-businesses" target="_blank">read more about e-invoicing benefits</a>).</li><li>Maintain consistent invoice numbering and templates to streamline bookkeeping.</li><li>Offer early payment discounts to encourage faster transactions.</li><li>Accept multiple payment methods, such as ACH, credit card, or PayPal, to reduce friction.</li><li>Periodically review and optimize your invoicing process to identify bottlenecks or outdated terms.</li></ul><h2>Sending Your First Invoice</h2>By following these six steps, you can create custom invoices that are:<ul><li>Accurate</li><li>Professional</li><li>Designed to help you get paid on time</li></ul>Using our&nbsp;<a href="https://1800accountant.com/blog/contracting-invoice-template">free invoice template</a>&nbsp;simplifies the process, so you can focus on running your business instead of chasing payments.A clear invoicing system leads to improved cash flow, reduced client disputes, and more accurate bookkeeping. If you’re ready to take your small business finances to the next level, explore&nbsp;<a href="https://1800accountant.com/services/bookkeeping">1-800Accountant’s bookkeeping and accounting services</a>&nbsp;to stay organized and compliant year-round.Schedule a free 30-minute consultation to get started.&nbsp;

A clear, accurate invoice not only helps you get paid faster but also strengthens your professional image and supports smooth bookkeeping practices. In this guide, we'll walk you through six easy steps to create an invoice that works every time.

Blog Thumbnail_How to Create an Invoice in 6 Steps_51200x630_1.png

How to Create an Invoice in 6 Simple Steps

As small businesses head into 2026, the accounting landscape is evolving at a faster pace than ever before. Many entrepreneurs are already familiar with automation tools that handle bookkeeping or expense tracking. But a new wave of technology called&nbsp;agentic AI&nbsp;is taking things a step further. Instead of waiting for prompts, these AI agents act autonomously, making decisions, initiating workflows, and managing tasks in real-time. For small business owners juggling operations, compliance, and growth, this next-generation automation represents both a powerful opportunity and a new set of responsibilities.This blog explores what agentic AI is, how small businesses are utilizing this technology today, what it means for accounting and taxes, and why partnering with 1-800Accountant, America's leading virtual accounting firm, provides both cutting-edge tools and expert human support.<h3>Key Highlights</h3><ul><li>Agentic AI for small businesses differs from traditional AI in that it autonomously completes tasks, rather than just answering queries.</li><li>By 2026, most enterprise platforms will integrate AI agents, and small businesses are quickly catching up.</li><li>Small businesses use agentic AI to automate customer support, accounting, tax prep, and financial forecasting.</li><li>The most effective strategies blend AI efficiency with human oversight to ensure accuracy and compliance.</li><li><a href="https://1800accountant.com/">1-800Accountant</a>&nbsp;helps businesses implement AI-enabled accounting safely and securely, combining technology with trusted tax expertise.</li></ul><h2>What Is Agentic AI?</h2>Learn how to use Agentic AI for small businesses and what it is.<h3>Definition and How It Differs from Earlier AI</h3>Agentic AI systems refers to systems made up of autonomous AI agents. These intelligent programs perform actions based on real-time data, including:&nbsp;<ul><li>Taking initiative</li><li>Making decisions</li><li>Executing actions</li></ul>Unlike generative AI tools that create text or respond to prompts, agentic AI doesn’t wait to be asked. Instead, it acts. These agents can schedule tasks, handle transactions, or even identify anomalies in accounting data without human direction.In practical terms, earlier AI helped you&nbsp;analyze&nbsp;data, while agentic AI helps you&nbsp;act on&nbsp;it. For small businesses, that means AI can now manage bookkeeping workflows, track compliance dates, and recommend cash flow adjustments before problems arise.<h3>Why the Shift Matters for Small Business</h3>This shift matters because it levels the playing field. According to industry forecasts, by 2026, a substantial share of enterprise software will embed autonomous AI features. For small businesses that often operate with limited staff, agentic AI bridges gaps in:<ul><li>Time</li><li>Skill</li><li>Capacity</li></ul>Instead of hiring extra admin support or spending hours reconciling accounts, AI agents can perform those functions continuously and accurately.When integrated thoughtfully, agentic AI platforms enable small businesses to focus on their core strengths while AI handles the operational details in the background. This includes:&nbsp;<ul><li>Building products</li><li>Serving customers</li><li>Growing revenue</li></ul><h2>How Small Businesses Are Using Agentic AI in 2026</h2><h3>Real-World Use Cases</h3>Agentic AI has transitioned from theory to reality in 2026. Small businesses across various industries are already utilizing it to streamline their daily operations, which is how small businesses use AI agents. Key examples include:<ul><li>Customer Support Agents:&nbsp;Automated virtual assistants can respond to frequently asked questions, resolve common issues, and escalate complex cases to human reps.&nbsp;<a href="https://www.alphabold.com/top-agentic-ai-use-cases/" target="_blank">Many firms have deployed customer service AIs</a>&nbsp;that handle 60% of inquiries end-to-end.</li><li>Sales &amp; Prospecting Agents:&nbsp;AI agents identify qualified leads, send outreach emails, and manage follow-ups automatically, freeing sales teams for strategy and other high-level functions.</li><li>Workflow Automation:&nbsp;These systems automate routine tasks, such as invoice generation, vendor payments, and payroll updates.</li><li>Accounting &amp; Finance:&nbsp;AI-enabled bookkeeping platforms automate categorization, bank reconciliation, and even preliminary tax deductions.</li><li>Forecasting Agents:&nbsp;Predictive models project cash flow, flag risks, and suggest cost-saving measures.</li></ul><h3>Efficiency, Growth, and Risk Metrics</h3>Agentic AI accounting trends 2026: The numbers&nbsp;<a href="https://bernardmarr.com/the-8-biggest-ai-agent-trends-for-2026-that-everyone-must-be-ready-for/" target="_blank">back up the trend</a>.&nbsp;<a href="https://www.salesforce.com/blog/ai-and-the-future-of-small-business/" target="_blank">Roughly 75% of small and midsize businesses</a>&nbsp;are investing in AI, and 85% expect measurable ROI. Overall, 91% of small businesses using AI report that it boosts their revenue. In the accounting field specifically, small firms adopting AI tools report up to 45% efficiency gains.Meanwhile, studies project an&nbsp;<a href="https://www.thomsonreuters.com/en/press-releases/2025/june/the-ai-adoption-reality-check-firms-with-ai-strategies-are-twice-as-likely-to-see-ai-driven-revenue-growth-those-without-risk-falling-behind" target="_blank">annual $12 billion impact</a>&nbsp;in time savings for U.S. accounting professionals, indicating that tax automation for small businesses is already reshaping financial functions.However, not every business is ready. Adoption remains uneven, with only about 20% of small businesses currently utilizing AI in finance. The opportunity gap is vast and closing fast.<h3>Common Barriers and How to Overcome Them</h3>The most significant barriers to agentic AI adoption for small businesses are:<ul><li>Skill gaps:&nbsp;Many owners lack the technical expertise to configure AI systems effectively.</li><li>Trust and transparency:&nbsp;Entrepreneurs worry about losing control over sensitive financial data.</li><li>Integration challenges:&nbsp;Older accounting systems or manual processes can make automation difficult.</li></ul>The solution lies in combining automation with human oversight, and tools alone aren’t enough. Businesses need experts who understand compliance, data security, and accounting accuracy. Partnering with firms like 1-800Accountant ensures these systems are deployed responsibly and effectively.<h2>The Role of Agentic AI in Accounting, Tax and Bookkeeping</h2>Learn more about AI-enabled bookkeeping for SMEs below. Intelligent automation empowers you to build custom AI agents with natural language processing and machine learning with minimal human intervention. Save time by streamlining data management, task management, financial management, inventory management.<h3>What’s Changing in the Accounting Workflow</h3>By late 2025, more than 80% of routine bookkeeping tasks were partially or fully automated, and agentic AI will further expand this capability. These agents can:<ul><li>Pull business data from multiple systems.</li><li>Flag discrepancies.</li><li>Prepare draft financial reports or tax summaries.</li></ul>For example, an AI agent might monitor your business expenses in real time and alert you to potential deductible items well in advance of tax season. This proactive approach not only improves accuracy but also reduces year-end stress.<h3>Why Human Accountants Still Matter</h3>Even the most intelligent AI can’t replace human judgment. Accountants will:&nbsp;<ul><li>Interpret context.</li><li>Understand nuance.</li><li>Ensure compliance with evolving tax laws.</li></ul>That’s why 1-800Accountant blends AI-enabled efficiency with hands-on professional tax expertise.Our&nbsp;<a href="https://1800accountant.com/services/bookkeeping" target="_self">small business bookkeeping services</a>&nbsp;and&nbsp;<a href="https://1800accountant.com/services/small-business-taxes/online-filing" target="_self">tax prep for small business</a>&nbsp;solutions use automation for data processing. However, our accountants oversee every file for accuracy, ensuring clients stay compliant and maximize savings.<h3>Strategic Value for Small Business Owners</h3>When used properly, agentic AI becomes a strategic ally that:<ul><li>Frees up time</li><li>Enhances insight</li><li>Helps owners make informed, proactive decisions</li></ul>For instance, an AI forecasting agent might simulate multiple cash flow scenarios. At the same time, your accountant reviews the data and recommends strategies, such as adjusting expense timing or deferring income, to achieve optimal tax outcomes. This partnership between AI and human expertise ensures businesses don’t just collect data, but also act on it effectively.<h2>Why Partner with 1-800Accountant for AI-Enabled Services</h2><h3>Differentiator: AI + Human Expertise</h3>At&nbsp;<a href="https://1800accountant.com/" target="_self">1-800Accountant</a>, we believe AI should enhance human expertise, not replace it. Our approach combines cutting-edge tools with CPAs, EAs, bookkeepers, and tax professionals who understand the unique challenges of small businesses. Clients benefit from real-time insights, transparent reporting, and year-round support, all delivered with our hallmark personal touch.<h3>How We Support Transition to Agentic AI</h3>Our team helps clients integrate agentic AI seamlessly into their workflows. We deploy AI-powered bookkeeping and tax tools with easy-to-understand real-time dashboards, automated alerts, and predictive analytics. This enables our accountants to continuously monitor and interpret the data.We also focus on education and client training, ensuring business owners understand how AI decisions are made and where human oversight is applied. For more insight, explore our piece on&nbsp;<a href="https://1800accountant.com/blog/how-1800accountant-uses-agentforce" target="_self">using AI agents alongside human customer service teams</a>.<h3>What Small Business Owners Should Ask</h3>Before adopting small business accounting AI tools, business owners should ask:<ul><li>How is human oversight built into your accounting process?</li><li>What safeguards protect my financial data?</li><li>How will AI decisions affect my tax risk or compliance?</li><li>What are the expected time and cost savings?</li></ul>Transparency and trust are crucial. The right provider will guide you through each answer and demonstrate measurable value.<h2>Practical Steps for Agentic AI with Small Business Owners</h2><h3>Define Your Internal Process and Identify Pain Points</h3>Start by listing where your business spends the most time or money:<ul><li>Bookkeeping</li><li>Invoicing</li><li>Payroll</li><li>Forecasting</li></ul>Tasks that are repetitive, rule-based, or data-heavy are prime candidates for agentic AI.<h3>Partner with the Right Provider and Build Human-in-Loop</h3>When selecting a partner, choose one that combines technology with human advisory throughout the fiscal year. At 1-800Accountant, we integrate AI directly into client workflows while maintaining strong governance and data security standards. Your accountant or team remains your point of contact, with AI supporting their work.<h3>Monitor, Evaluate, and Iterate</h3>Set clear benchmarks for success. Track:<ul><li>Time saved</li><li>Error reduction</li><li>Insight generation</li></ul>Use dashboards to review performance with your accountant on a quarterly basis, making adjustments as needed.<h3>Prepare for the Future</h3>Agentic AI adoption is accelerating. Businesses that delay adoption risk falling behind their competitors, who are already embracing these tools. Still, AI is most effective when guided by experienced professionals, which is a principle at the core of 1-800Accountant’s innovative service model.<h2>Next Steps</h2>Agentic AI is more than the next tech buzzword. It’s a defining shift in how small businesses manage:<ul><li>Operations</li><li>Finances</li><li>Growth&nbsp;</li></ul>From automated bookkeeping to proactive tax planning, AI agents empower entrepreneurs to make smarter, faster decisions. But the real value emerges when paired with human expertise.1-800Accountant: human + AI accounting services. We combine the precision of AI with the personalized guidance of experienced CPAs, EAs, bookkeepers, and tax professionals. Our hybrid model ensures your business stays efficient, compliant, and ready for the future.To explore how AI-enabled accounting and tax services can transform your small business in 2026 and beyond,&nbsp;<a href="https://1800accountant.com/" target="_self">schedule a free 30-minute consultation with 1-800Accountant today.</a>&nbsp;

Many entrepreneurs are already familiar with automation tools that handle bookkeeping or expense tracking. But a new wave of technology called agentic AI is taking things a step further. Instead of waiting for prompts, these AI agents act autonomously, making decisions, initiating workflows, and managing tasks in real-time.

Blog Thumbnail_How Small Businesses Are Using Agentic AI in 2026_1200x630_2.png

How Small Businesses Are Using Agentic AI in 2026

As a small business owner, you’ve got a lot of responsibilities. You’re busy building your operations, ensuring customer satisfaction, and managing your employees. As your business grows, you may also use&nbsp;<a href="https://1800accountant.com/blog/proscons-entity-formation-independent-contractors" target="_self">independent contractors or freelancers</a>, which means managing 1099 tax forms. With the Internal Revenue Service (IRS) expanding reporting requirements in 2026, it’s critical to understand how to issue 1099s correctly to stay compliant and avoid penalties.Unlike salaried W-2 employees, contractors require a&nbsp;<a href="https://1800accountant.com/blog/how-to-file-taxes-independent-contractor">1099 form to do their taxes</a>, which you must provide. It might seem intimidating if you've never or don't know how to issue a 1099 form, but there’s no need to worry. This guide simplifies complex IRS steps for your small business, ensuring compliance while limiting distractions.&nbsp;<h2>What is a 1099 form?</h2><a href="https://1800accountant.com/blog/what-is-a-1099">A 1099 form</a>&nbsp;reports income paid to someone who isn’t your employee, such as a freelancer or contractor. For traditional employees, you'd issue a W-2, Wage and Tax Statement, with federal income tax withheld and state income tax withheld from their taxable income each period. Taxes aren't withheld for nonemployees as they handle their own tax payments separately. They aren't included in company profit-sharing plans and must make their own medical and healthcare payments.Most small businesses issue&nbsp;<a href="https://www.irs.gov/forms-pubs/about-form-1099-nec" target="_blank">IRS Form 1099-NEC</a>, Nonemployee Compensation, for payments to contractors that meet or exceed $600 within a year. If you transmit payment via PayPal, Venmo, or similar platforms, those transactions may also generate IRS Form 1099-K. This form reports payments made from:&nbsp;<ul><li>Credit, debit, or stored value cards.</li><li>Payment apps or online marketplaces, also known as third-party settlement organizations (TPSOs), facilitate third-party network transactions.</li></ul>It's essential to always follow the contractor 1099 form rules and tax reporting process during tax season.&nbsp;<h3>What is the difference between 1099-MISC and 1099-NEC?</h3>1099 NEC vs MISC: IRS Form 1099-NEC and&nbsp;<a href="https://www.irs.gov/forms-pubs/about-form-1099-misc" target="_blank">IRS Form 1099-MISC, Miscellaneous Information</a>, are the most common types of 1099s that you will likely use to pay non-salaried workers.&nbsp;<ul><li>Use Form 1099-NEC to compensate contractors and freelancers for their work.&nbsp;</li><li>Use Form 1099-MISC for miscellaneous payments for rent, legal fees, prizes, or royalties.</li></ul>The IRS will continue to use both forms in 2026, so it's best to ensure that you report each payment type on the correct version.&nbsp;<h2>How to Generate a 1099 Form as a Small Business</h2>There are several ways that small business owners can generate the respective 1099 form they need to issue to contractors. There are traditional paper approaches, online alternatives, and the option to work in-person or online with a virtual tax accountant.&nbsp;<ul><li>IRS Fillable PDFs: Best for small volumes; can be e-filed (for electronic filing) via&nbsp;<a href="https://www.irs.gov/e-file-providers/filing-information-returns-electronically-fire" target="_blank">the IRS FIRE system</a>.</li><li>Accounting Software: Many platforms (QuickBooks, Gusto, Wave) now auto-generate 1099s.</li><li>Virtual Accounting or Small Business 1099 Filing Service: Fastest and most accurate method; 1-800Accountant can manage filings and ensure IRS compliance.</li></ul>Ready to let the experts handle your 1099&nbsp;<a href="https://1800accountant.com/services/income-taxes" target="_self">preparation and filing</a>? Schedule a free 30-minute consultation with 1-800Accountant to get started.&nbsp;<h2>Steps for Issuing a Form 1099</h2>Now that you know what a 1099 is, the methods for generating it, and the differences between common 1099 forms, we break down the steps for small business owners to issue a 1099 form for their contractor workers.&nbsp;<h3>Step 1. Collect Contractor Information</h3>First, small business owners must gather contractors' information to issue the appropriate Form 1099, which is typically found on IRS Form W-9, Request for Taxpayer Identification Number and Certification. It includes the following.&nbsp;<ul><li>Home address</li><li>Legal name</li><li>Tax identification number (or&nbsp;<a href="https://1800accountant.com/services/ein-tax-id-filing" target="_self">EIN</a>)</li><li>Reconciled income payments</li></ul>Avoid corrections and delays by verifying this information by the end of the year, before issuing a 1099.&nbsp;<h3>Step 2. Record Payments Throughout the Year</h3>It's imperative that you track all contractor payments throughout the year that meet or exceed the $600 threshold.&nbsp;While numerous tracking methods are available, the most efficient way to track contractor payments is by using do-it-yourself bookkeeping software, which still requires a significant amount of time and effort, or via 1-800Accountant's affordable, tax-deductible virtual bookkeeping solution, powered by a real bookkeeping expert.Either route will help you record payments throughout the year.&nbsp;<h3>Step 3. Complete Copy A and File with the IRS</h3>Next, small business owners must complete the Copy A of Form 1099-NEC, which must be submitted to the IRS by January 31, 2026, regardless of whether you file electronically or by mail.&nbsp;When you file paper copies of Form 1099-NEC, you must obtain a physical red form, fill out Copy A, and mail it to the IRS for it to be filed successfully. Note that e-filing is mandatory when filing 10 or more returns.&nbsp;<h3>Step 4. Send Copy B to Contractors</h3>After completing Copy A form and filing it with the IRS, the next step is to send Copy B to your&nbsp;<a href="https://1800accountant.com/blog/bookkeeping-for-independent-contractors-6-tips-to-keep-in-mind" target="_self">independent contractors</a>, also by January 31. To do this, you can download and print Copy B from the IRS website and send it to each of your independent contractors.If your contractors prefer electronic materials, you may send Copy B electronically, provided you have obtained written consent. &nbsp;<h3>Step 5. Keep Copies for Your Records</h3>Finally, ensure compliance and organization for your small business and financial records by saving a copy of all 1099 forms.Retain them for at least three years for audit purposes.&nbsp;<h2>Who Should Receive a 1099?</h2>Any non-employee, individual or partnership, paid $600 or more for services during the year should receive a 1099, but there are exceptions. Payments to corporations, most product purchases, or via credit card (handled by 1099-K issuers), are exempt. However, law firms and medical professionals may still receive 1099s even if they are incorporated.The IRS has created several versions of the 1099 form. While you will likely use a 1099-MISC or a 1099-NEC, you may require a different variant. Some of the other 1099 tax documents include:&nbsp;<ul><li>1099-INT for reporting income from interest</li><li>1099-DIV for reporting cash paid for dividends</li><li>1099-R for worker pensions and payouts</li><li>1099-S for reporting payments for real estate transactions</li><li>1099-G for reporting tax refunds and unemployment benefits</li></ul><h2>Common 1099 Filing Mistakes to Avoid</h2>If you're handling 1099 preparation and distribution for your business, ensure you avoid these common 1099 filing mistakes.&nbsp;<ul><li>Missing the January 31 deadline.</li><li>Sending incorrect contractor info or Tax ID.</li><li>Filing 1099-MISC instead of 1099-NEC.</li><li>Forgetting to file the 1096 summary for paper submissions.</li><li>Not reporting payments made through Venmo or PayPal properly.</li></ul>Avoid errors and potential IRS penalties when you let our experts handle your 1099 filings.<h2>Deadlines for 1099 Forms (2026)</h2>While the main 1099 filing deadline is January 31 each year, here are the key deadlines to be aware of for 2026.&nbsp;<ul><li>January 31, 2026: Deadline to issue all 1099-NEC/MISC forms and file with the IRS.</li><li>February 28, 2026: Paper filing deadline for other 1099 types (if applicable).</li><li>March 31, 2026: E-filing deadline for other information returns.&nbsp;</li></ul><h2>1099 FAQs</h2><h3>1. What’s the minimum amount for issuing a 1099?</h3>If you pay independent contractors $600 or more within a calendar year, you should issue a 1099 form to them. If you paid them less than $600, you do not need to provide a 1099 form to that worker, although they will still need to report that income to the IRS.&nbsp;<h3>2. Is a 1099 required for cash payments?</h3>Yes, a 1099 is required for cash payments. Your preferred payment method doesn't matter, as all options qualify, including cash, check, and transfer. So, if your 1099 worker was paid $600 or more within a calendar year, they should receive a 1099 form, regardless of your chosen payment method.&nbsp;<h3>3. Do I need to issue a 1099 for payments via PayPal or Venmo?</h3>If PayPal, Venmo, or other payment platforms you use issue a 1099-K to your contractors, you won't have to issue an additional 1099. For 2025 and 2026, the reporting threshold is now $ 20,000 or more in gross payments and more than 200 transactions, which was restored by the passage of the&nbsp;<a href="https://www.hrblock.com/tax-center/irs/tax-law-and-policy/one-big-beautiful-bill-taxes/" target="_blank">One Big Beautiful Bill Act</a>.&nbsp;<h3>4. What if I file late or make an error?</h3>If you've found an error after issuing a 1099, file a corrected return with the IRS as soon as the issue is discovered. Filing late, however, typically subjects business owners to late filing penalties.&nbsp;<h3>5. Can my accountant issue 1099s for me?</h3>Yes, EAs, tax professionals, and CPAs with services like 1-800Accountant can prepare and file your 1099s on your behalf. Fees associated with 1099 services are flat-rate and tax-deductible.&nbsp;<h3>6. What’s the penalty for not issuing a 1099?</h3>The penalty for failing to issue a 1099 can range from $60 to over $680, depending on whether the failure is due to lateness or intentional disregard. Many businesses face IRS penalties promptly, as some will accrue.<h3>7. Do I have to issue a 1099?</h3>If you have paid non-employees $600 or more during the year, it is your obligation to issue the appropriate 1099 form to them and the IRS.&nbsp;<h3>8. When do I have to issue a 1099 form?</h3>The deadline for issuing 1099 forms is January 31 of each year in advance of tax time. A copy of the form must also be filed with the IRS by that date. If you fail to issue a required 1099, you may be subject to penalties from the IRS.<h3>9. What’s the difference between 1099-NEC and 1099-MISC?</h3>The IRS uses the 1099-MISC and 1099-NEC to report non-employee taxable payments. The 1099-MISC is used to report payments not subject to self-employment tax. Form 1099-NEC is used for reporting non-employee compensation, which is typically subject to the 15.3% self-employment tax that funds Social Security and Medicare.<h3>10. Does an employer have to provide a 1099?</h3>The 1099 form reports non-employment income to the IRS. Businesses must issue a 1099 form to a taxpayer who has received at least $600 or more in non-employment income during the tax year.<h3>11. What’s the minimum amount of money required to issue a 1099? Who qualifies for a 1099?</h3>Businesses must issue a 1099 form to a taxpayer who has received at least $600 in non-employment income during the tax year. Non-employees must report their income to the IRS even if they are paid less than the $600 threshold.&nbsp;<h2>Simplify 1099 Compliance with 1-800Accountant</h2>Don’t risk penalties or filing mistakes – get help filing your 1099s now with 1-800Accountant, America's leading virtual accounting firm for small businesses. Let our team of experts prepare and submit your 1099s, handle contractor records, and ensure IRS compliance, on time, every time.&nbsp;We offer a comprehensive suite of tax-deductible financial services, ideal for small businesses managing 1099 workers. Services include&nbsp;<a href="https://1800accountant.com/services/small-business-taxes">small business taxes and advisory</a>,&nbsp;<a href="https://1800accountant.com/services/entity-formation">entity formation</a>,&nbsp;<a href="https://1800accountant.com/services/bookkeeping">bookkeeping</a>, and&nbsp;<a href="https://1800accountant.com/services/payroll">payroll</a>, which empowers you to focus your time and energy on what you do best: growing your business.

With the IRS expanding reporting requirements in 2026, it’s critical to understand how to issue 1099s correctly to stay compliant and avoid penalties. Unlike salaried W-2 employees, contractors require a 1099 form to do their taxes which you must provide.

Blog Thumbnail_How to Issue a 1099 Form as a Small Business_51200x630_1.png

How to Issue a 1099 Form as a Small Business

For small business owners, keeping accurate financial records can be the difference between staying organized and feeling overwhelmed at tax time. A general ledger is one of the most essential tools for tracking your business’s financial health — yet many entrepreneurs overlook it until issues occur. Whether you’re a freelancer, startup founder, or growing small business owner, maintaining a clear and consistent ledger provides a single source of truth for every transaction that affects your business.To help you get started, 1-800Accountant, America's leading virtual accounting firm, has created a free downloadable general ledger template that&nbsp;<a href="https://1800accountant.com/blog/small-business-bookkeeping" target="_self">simplifies your bookkeeping</a>&nbsp;and enables you to stay compliant throughout the year. Below, we’ll explain why the ledger is critical, what it includes, how to use a general ledger template, and when it might be time to upgrade to a more advanced system.<a href="https://assets.contentstack.io/v3/assets/blt5aaad8b5e90091d6/bltfa36355d919e620a/690a05ffcdd56a14350c3ec9/General_Ledger_Template_by_1-800Accountant_-_General_Ledger.csv" target="_blank">Download your free general ledger template</a><h2>Why a General Ledger Is Critical for Small Businesses</h2>A&nbsp;<a href="https://en.wikipedia.org/wiki/General_ledger" target="_blank">general ledger</a>&nbsp;is the master record of all your business’s financial transactions. Maintaining a general ledger for startups and more established companies is critical. Every dollar earned or spent — from sales revenue to payroll expenses — flows through it. In&nbsp;<a href="https://1800accountant.com/blog/bookkeeping-101-double-entry">double-entry accounting</a>, transactions are first recorded in journals, like your sales or expense journal, and then summarized in the small business general ledger, which feeds directly into your trial balance and financial statements.<img src="https://images.contentstack.io/v3/assets/blt5aaad8b5e90091d6/blt7c537d13da1fa6f2/690a06df5ba74c60848699ed/Blog_Thumbnail_General_Ledger_Template_for_Small_Businesses_asset.png" alt="Blog_Thumbnail_General_Ledger_Template_for_Small_Businesses_asset.png" height="auto"/>A well-maintained ledger offers multiple benefits:<ul><li>Accuracy:&nbsp;Reduces errors in financial reporting by ensuring every transaction is accounted for.</li><li>Audit trail:&nbsp;Provides documentation for every entry, making it easier to track discrepancies.</li><li>Tax support:&nbsp;Simplifies year-end reporting and ensures you don’t miss valuable tax deductions.</li><li>Decision-making:&nbsp;Helps you monitor profitability, expenses, and cash flow trends.</li></ul>Neglecting your accounting ledger can lead to messy books, missed tax deductions, or late filings — issues that cost time and money and cause distractions. A consistent ledger system keeps you organized and confident when it matters most.<h2>Anatomy of a General Ledger: Components and Structure</h2>Your&nbsp;<a href="https://www.investopedia.com/terms/g/generalledger.asp" target="_blank">general ledger</a>&nbsp;organizes financial data by account type, following a chart of accounts that groups transactions into five main categories:<table><colgroup data-width='500'><col style="width:28.9125%"/><col style="width:71.0875%"/></colgroup><tbody><tr><td>Account Type</td><td>Examples</td></tr><tr><td>Assets</td><td>Cash, Accounts Receivable, Equipment</td></tr><tr><td>Liabilities</td><td>Accounts Payable, Credit Card Debt</td></tr><tr><td>Equity</td><td>Owner’s Capital, Retained Earnings</td></tr><tr><td>Revenue</td><td>Sales, Service Income</td></tr><tr><td>Expenses</td><td>Rent, Utilities, Office Supplies</td></tr></tbody></table>Each account includes several key fields:<ul><li>Date&nbsp;– When the transaction occurred</li><li>Description&nbsp;– A brief explanation (e.g., “Client invoice #102”)</li><li>Reference&nbsp;– Invoice number or job code</li><li>Debit and Credit&nbsp;– The amounts recorded to each side of the transaction</li><li>Running Balance&nbsp;– Updated total after each entry</li></ul>For example, when your business makes a $500 sale, you would debit Cash and credit Sales Revenue. If you later pay $200 in office supplies, you would debit Office Supplies Expense and credit Cash. These entries flow through your ledger and form the foundation for accurate financial statements.<h2>How to Use the Downloadable General Ledger Template</h2>Our free template is designed for use in Microsoft Excel or Google Sheets and includes pre-labeled columns for account name, date, description, debit, credit, and account balance.<a href="https://assets.contentstack.io/v3/assets/blt5aaad8b5e90091d6/bltfa36355d919e620a/690a05ffcdd56a14350c3ec9/General_Ledger_Template_by_1-800Accountant_-_General_Ledger.csv" target="_blank">Download your free general ledger template</a><h3>Step-by-Step Setup</h3><ol><li>Customize your chart of accounts: Rename or add accounts to fit your business (e.g., “Client Income” or “Software Subscriptions”).</li><li>Assign account numbers: Use simple numbering (e.g., 1000s for assets, 2000s for liabilities) for easier organization.</li><li>Enter transactions: Record each financial event, noting whether it’s a debit or credit.</li><li>Check your balance: After each entry, confirm the running total matches your bank or payment records.</li><li>Add notes: Include job codes or comments to clarify unusual transactions.</li></ol><h3>Tips for Accuracy</h3><ul><li>Record entries promptly to avoid gaps.</li><li>Always double-check debit and credit placement.</li><li>Reconcile totals with your bank statements each month.</li><li>Protect your sheet with a password or back it up to a secure cloud storage service.</li></ul><h2>Best Practices and Maintenance Tips</h2>A general ledger is only as good as the consistency of its updates. To keep your books clean:<ul><li>Stay consistent: Use the same naming conventions and numbering for all accounts.</li><li>Reconcile regularly: Compare your ledger with bank and credit card statements at least monthly.</li><li>Automate when possible: Accounting software can reduce manual data entry and human error.</li><li>Run monthly reviews: Review for anomalies and ensure your&nbsp;trial balance&nbsp;aligns.</li><li>Avoid common pitfalls: Missing entries, misclassified expenses, and rounding errors can create significant issues later.</li></ul>When in doubt, reach out to a professional. Our tax-deductible, full-service&nbsp;<a href="https://1800accountant.com/services/bookkeeping" target="_self">bookkeeping solution</a>, backed by a designated bookkeeper, can help review and maintain your records accurately year-round.<h2>Using Your Ledger to Generate Reports and Insights</h2>Once your transactions are entered, your ledger becomes a powerful analysis tool. With your ledger, you can:<ul><li>Create financial statements: Use totals to prepare your&nbsp;profit and loss statement&nbsp;and&nbsp;balance sheet.</li><li>Monitor cash flow: Identify trends in spending or income fluctuations.</li><li>Prepare for tax season: A complete ledger makes it easy to file accurate returns and claim all eligible deductions.</li><li>Spot performance trends: Compare current results with prior months or years.</li></ul>Your ledger isn’t just for compliance purposes — it’s a roadmap to smarter business decisions. If you’re unsure how to interpret your reports or where to go next, consider scheduling a free 30-minute consultation with 1-800Accountant to get started.&nbsp;<h2>When and How to Scale Beyond a Spreadsheet</h2>While our free template is an excellent starting point, you may outgrow it as your business expands. Signs you’re ready for more advanced bookkeeping tools include:<ul><li>High transaction volume or multiple revenue streams</li><li>Multi-location or multi-currency operations</li><li>Need for real-time reporting or payroll integration</li><li>Inventory tracking or invoicing complexities</li></ul>At this stage, transitioning to accounting software or outsourcing bookkeeping can save time and improve the accuracy of your ledger. 1-800Accountant offers&nbsp;<a href="https://1800accountant.com/services/bookkeeping">full-service bookkeeping</a>&nbsp;and accounting solutions designed to scale with your business, and a good ledger eases that transition.&nbsp;<h2>Final Thoughts &amp; Call to Action</h2>A clean, accurate ledger is essential to your small business operations. We hope you will download&nbsp;<a href="https://assets.contentstack.io/v3/assets/blt5aaad8b5e90091d6/bltfa36355d919e620a/690a05ffcdd56a14350c3ec9/General_Ledger_Template_by_1-800Accountant_-_General_Ledger.csv" target="_blank">your free general ledger template</a>&nbsp;and reach out to us when you're ready for professional bookkeeping support.In the meantime, please review our other free materials, including our chart of accounts template, bookkeeping checklist, and financial statement guide.

A general ledger is one of the most essential tools for tracking your business’s financial health, yet many entrepreneurs overlook it until issues occur. Whether you’re a freelancer, startup founder, or growing small business owner, maintaining a clear and consistent ledger provides a single source of truth for every transaction that affects your business.

Blog Thumbnail_General Ledger Template  for Small Businesses1200x630_2.png

Free General Ledger Template for Small Businesses

If you’ve made extra cash selling clothes, art, or collectibles on Depop, you might be wondering Do I have to pay taxes on Depop sales? The short answer: yes, in many cases you do — especially if your selling activity goes beyond the occasional closet clean out.Understanding how Depop income fits into your overall tax picture can save you from unpleasant surprises come tax season. Whether you sell casually or are an up-and-coming reseller, knowing what counts as taxable income, which forms to expect, and how to track your deductions can help you stay compliant and maximize your tax savings.<h3>Key Highlights</h3><ul><li>Depop online sellers may owe federal income tax or <a href="https://1800accountant.com/calculators/self-employment-tax-calculator" target="_self">self-employment tax</a>, depending on how frequently they sell and whether they earn a profit.</li><li>The IRS requires all income to be reported, even if you don’t receive Form 1099-K, Payment Card and Third Party Network Transactions.</li><li>Platforms like Depop automatically collect and remit state sales tax for many U.S. orders, but sellers are still responsible for reporting their income.</li><li>Deductible expenses — such as packaging, shipping costs, and platform fees — can lower your taxable profit.</li><li>Professional bookkeeping and tax guidance from <a href="https://1800accountant.com/services/income-taxes">1-800Accountant</a> can simplify compliance and help you claim every deduction you’re entitled to.</li></ul><h2>Key Tax Rules That Apply to Depop Sales</h2><h3>Income vs. Hobby (Casual Sale)</h3>If you’re occasionally selling personal items on Depop, for example, offloading a few old jackets at a loss, you probably don’t owe tax on those sales. But the line between a hobby and a business depends on your intent and frequency.The IRS expects you to <a href="https://www.irs.gov/businesses/understanding-your-form-1099-k" target="_blank">report all income</a> unless it’s clearly excluded. That means if you buy inventory to resell, advertise your items, or regularly earn a profit, the IRS will likely treat your activity as a business, and you will owe online reselling taxes. You’ll be subject to income tax and possibly the 15.3% self-employment tax that funds Social Security and Medicare.&nbsp;<h3>The $400 Rule (Self-Employment Net Earnings Threshold)</h3>Once your net profit from self-employment, including Depop resales, exceeds $400 for the year, you typically owe self-employment tax.&nbsp;Even if you make less than $400, you may still owe income tax if your overall income is high enough. Keeping accurate records from the start helps you determine where you stand at year-end.<h3>1099-K Reporting Rules &amp; Changing Thresholds</h3>Most first-time sellers have questions about Depop income tax reporting. Depop (through Stripe) issues Form 1099-K to certain sellers, summarizing total payments processed. Historically, sellers only received a 1099-K if their payments exceeded $20,000 and 200 transactions in a year.While proposed changes would have lowered the <a href="https://millancpa.com/insights/postponed-online-marketplaces-sending-irs-form-1099-k-for-sales-of-600-or-more-in-2022" target="_blank">1099-K reporting threshold</a> to $600, the passage of the One Big Beautiful Bill Act in 2025 has preserved the historical threshold of&nbsp; $20,000 and 200 transactions.Regardless of whether you receive the form, the IRS requires you to report all income. Depop may also request your tax ID if your gross sales exceed $5,000 annually. Remember, receiving a Depop 1099-K doesn’t automatically mean you owe taxes on the full amount — it simply reports gross payments before expenses.<h2>How Depop Handles Sales Tax (Depop Marketplace Tax)</h2><h3>Marketplace Facilitator Model</h3>The platform operates under the <a href="https://www.avalara.com/blog/en/north-america/2024/03/what-is-an-online-marketplace.html?utm_source=chatgpt.com" target="_blank">marketplace facilitator</a> Depop sales tax rules used by most online platforms. This means Depop automatically calculates, collects, and remits state sales tax on behalf of U.S. sellers when an order ships to a U.S. buyer. According to the <a href="https://depophelp.zendesk.com/hc/en-gb/articles/360012516318-US-State-Sales-Tax-on-Depop-Orders-FAQ" target="_blank">Depop state sales tax policy</a>, you don’t need to manually collect sales tax yourself in most cases.However, Depop’s automatic collection may not cover all states or product categories, so it’s wise to verify your specific obligations based on where your buyers are located to remain compliant.<h3>Nexus and Seller Responsibilities</h3>Sales tax “nexus” refers to your connection with a state — through physical presence or sales volume — that triggers tax responsibilities there. Even though Depop handles sales tax collection, you may still need to report those sales on your state personal tax return or maintain proper documentation.If you operate across multiple states or use several resale platforms, professional help from <a href="https://1800accountant.com/services/industry/ecommerce" target="_self">1-800Accountant’s e-commerce accounting experts</a> ensures you remain compliant in every jurisdiction.<h2>Calculating Taxable Income from Depop</h2><h3>Gross Receipts vs. Net Profit</h3>For tax purposes, you’ll report your gross receipts — the total amount you receive from sales, including shipping and handling. Then you subtract your cost of goods sold (COGS) and other eligible expenses to determine your net profit.Example: You buy an item for $20, sell it for $50, and pay $5 in Depop fees and $7 for shipping. Your taxable gain = $50 – ($20 + $5 + $7) = $18.<h3>Deductible Business Expenses</h3>Depop sellers can deduct many ordinary and necessary business expenses, including:<ul><li>Shipping supplies and postage</li><li>Packaging and labeling materials</li><li>Depop, PayPal, or Stripe transaction fees</li><li>Internet and phone expenses used for your business</li><li>A portion of home office costs, if applicable</li><li>Bookkeeping or virtual outsourced tax prep fees</li></ul>Maintaining receipts and digital records ensures you can claim every deduction and substantiate your expenses in case of an audit.<h3>What if You Sold at a Loss?</h3>If you sell personal items for less than you paid, the loss generally isn’t deductible. For instance, selling a used jacket for $30 when you originally paid $80 doesn’t create a deductible loss — it simply reduces your taxable income to zero on that sale.However, if you operate a bona fide resale business, legitimate losses may be deductible against other business income, depending on your structure. It’s best to consult a tax professional to determine eligibility.<h2>Reporting Depop Income to the IRS</h2><h3>Schedule C / Self-Employment Tax</h3>If your Depop activity qualifies as a business, you’ll report income and expenses on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). Your net earnings over $400 are also subject to self-employment tax for Social Security and Medicare.1-800Accountant’s <a href="https://1800accountant.com/services/income-taxes">personal income tax preparation services</a> can handle these filings for you, ensuring your deductions and credits are maximized.<h3>Estimated Quarterly Taxes</h3>Self-employed sellers who expect to owe at least $1,000 in tax for the year generally need to make quarterly estimated tax payments. <a href="https://1800accountant.com/blog/when-are-business-taxes-due">Timely payments</a> can help you avoid penalties and interest, while encouraging accuracy.<h3>State Income Tax Considerations</h3>Most states also tax income from online sales. Thresholds vary, but in many cases, any profit must be reported. Check your state’s Department of Revenue website for details, or rely on a trusted accountant to manage state filings alongside your federal return.<h2>Common Questions &amp; Edge Cases</h2><h3>What if I Don’t Receive a 1099-K?</h3>You’re still required to report your income regardless of the forms you receive. The IRS states that all income must be reported, even if you don’t receive a 1099-K. Use Depop transaction summaries, PayPal records, and bank deposits to reconstruct your earnings in the absence of this form.<h3>Occasional “Virtual Garage Sale” vs. Resale Business</h3>If you sell items occasionally without intent to profit, you’re likely in hobby territory. But consistent activity — buying items to resell, running promotions, or earning steadily — signals a business. The IRS determines this status by evaluating factors like:<ul><li>Frequency</li><li>Marketing</li><li>Time spent</li></ul><h3>Multi-Platform Sellers &amp; Split Income</h3>Are you selling items across Depop, Poshmark, eBay, or Etsy? If so, you must aggregate all your resale income and deduct expenses proportionally. Maintaining a unified bookkeeping system prevents underreporting and simplifies tax prep.<h3>Audits &amp; Documentation Best Practices</h3>Audit and documentation best practices include keeping digital copies of:<ul><li>Original purchase receipts</li><li>Shipping labels and expense invoices</li><li>Depop and PayPal transaction records</li><li>Inventory spreadsheets</li></ul>Using bookkeeping tools or 1-800Accountant’s virtual bookkeeping solution will provide clear records that stand up to IRS scrutiny.<h2>Practical Tips for Depop Sellers</h2>Whether you're a hobbyist or have made Depop selling a full-time business, these practical tips will help you get the most out of the platform.&nbsp;<ul><li>Start record-keeping early — log every sale and expense.</li><li>Use accounting software or spreadsheets to reconcile monthly income.</li><li>Review Depop’s reports against your payment processor and bank records.</li><li>Track quarterly estimated tax deadlines to avoid penalties.</li><li>Partner with professionals like <a href="https://1800accountant.com/">1-800Accountant</a> to handle filings, optimize deductions, and ensure compliance.</li></ul><h2>Next Steps for Depop Taxes</h2>While casual hobbyists have few responsibilities, most Depop sellers who earn a consistent income should expect to report their profits and possibly pay self-employment tax. Understanding distinctions — like hobby vs. business income and the evolving 1099-K thresholds — can make tax season a lot easier.&nbsp;If you’re earning through Depop or other resale platforms, you don’t have to navigate these complexities alone. Let 1-800Accountant, America's leading virtual accounting firm, help you stay compliant, organized, and ahead of the curve with expert bookkeeping and personalized tax planning designed to help online entrepreneurs focus on what they do best: sell.Schedule a free 30-minute consultation with a small business expert to get started.&nbsp;

Whether you sell casually or are an up-and-coming reseller, knowing what counts as taxable income, which forms to expect, and how to track your deductions can help you stay compliant and maximize your tax savings.

Blog Thumbnail_Do I Have to Pay Taxes on My Depop Sales_ _51200x630_1.png

Do I Have to Pay Taxes on My Depop Sales?

Rental real estate investing offers a convenient way for landlords and investors to increase their assets, with capital gains tax typically playing a significant role in these investments. The exact amount you may owe in capital gains tax can vary based on several factors.

Blog Thumbnail_How To Avoid Paying Capital Gains Tax on a Rental Property_1200x630_2.png

How To Avoid Paying Capital Gains Tax on a Rental Property

82% of small businesses fail due to poor cash flow management, according to research from Krieger Analytics and U.S. Bank. Understanding how cash moves in and out of your business is one of the most essential steps you can take toward financial stability.

Blog Thumbnail_Cash Flow Statement Template for Small Businesses51200x630_1.png

Cash Flow Statement Template for Small Business (Free Download)

A retroactive S corporation election can correct missed opportunities and align your business structure with your intended tax strategy. In this guide, we’ll explain what it is, how it works, who qualifies, and when it makes sense to seek professional help

Blog Thumbnail_What is a Retroactive S Corporation Election_1200x630_2.png

What Is a Retroactive S Corporation Election?

For small business owners and independent contractors, getting paid on time can&nbsp;<a href="https://1800accountant.com/blog/cash-flow-management" target="_self">make or break cash flow</a>. Yet many service-based professionals lose income or risk damaging client relationships due to unclear or incomplete invoices. Missing details, inconsistent billing formats, or vague payment terms can all lead to delays and disputes, ultimately straining your operations.Take the first step to streamlining your billing process with this free downloadable contracting invoice template explicitly designed for small businesses, freelancers, and contractors, courtesy of 1-800Accountant, America's leading virtual accounting firm. Using it will save time, improve professionalism, and ensure your records stay clean and ready for tax and bookkeeping purposes.<a href="https://assets.contentstack.io/v3/assets/blt5aaad8b5e90091d6/blt3139fc8a241ea93f/6900c27d772cdc61b28b79f0/Contracting_Invoice_Template_for_Small_Businesses_-_1-800Accountant.pdf" target="_blank">Download your free Contracting Invoice Template here</a><img src="https://images.contentstack.io/v3/assets/blt5aaad8b5e90091d6/bltafb485581b269765/6900c33a5c420b6fad5dd955/Blog_Thumbnail_Contracting_Invoice_Template_for_Small_Businesses_asset.png" alt="Blog_Thumbnail_Contracting_Invoice_Template_for_Small_Businesses_asset.png" height="auto"/><h2>What Is a Contracting Invoice? (vs. Other Invoices)</h2>A contracting invoice is a billing document used by contractors,&nbsp;<a href="https://1800accountant.com/services/industry/freelancer-self-employed" target="_self">freelancers</a>, and service-based businesses to request payment for work performed and services provided to customers. Unlike product-based invoices, these emphasize labor, services rendered, and project materials rather than physical goods.Typical examples include invoices from construction professionals, subcontractors, web developers, electrical contractors, consultants, or creative freelancers who bill per project or by milestone.Key differences from other invoices:<ul><li>Sales invoice:&nbsp;Focuses on the sale of tangible goods.</li><li>Consulting invoice:&nbsp;Often emphasizes hourly consulting time only.</li><li>Retainer invoice:&nbsp;Bills clients in advance for ongoing access to services.</li></ul>A contracting invoice also plays a critical role in your tax documentation and compliance — serving as proof of income for reporting and deductions. Maintaining detailed invoices supports accurate bookkeeping and simplifies end-of-year tax preparation.<h2>Key Elements Every Contracting Invoice Template Should Include</h2>A well-structured invoice ensures clarity and reduces confusion for your clients. Here are the key elements your contracting invoice should contain, achievable via our freelancer invoice template.<h3>Business and Client Details</h3><ul><li>Your business information: Name, address, phone number, email, and relevant license or registration numbers.</li><li>Client details: Their company name, contact person, address, and email.</li><li>Branding: Include your logo and consistent brand styling for professionalism.</li></ul><h3>Invoice Identifiers and Dates</h3><ul><li>A unique invoice number (e.g., “Invoice-001”).</li><li>Issue date and service dates to clarify when work was performed.</li><li>Due date and payment terms (for example, “Net 30”).</li></ul>Setting clear identifiers helps you organize records and prevent duplication or missed payments.<h3>Itemized Work Description and Costs</h3>Each task or service should be listed as a separate line item with descriptions, rates, quantities, and totals.Example from the free invoice template:<table><colgroup data-width='1000.0010000000001'><col style="width:49.523750476249525%"/><col style="width:18.73018126981873%"/><col style="width:13.015886984113015%"/><col style="width:18.73018126981873%"/></colgroup><tbody><tr><td>Item Description</td><td>Rate</td><td>Qty</td><td>Total</td></tr><tr><td>SEO Services</td><td>$1,000</td><td>1</td><td>$1,000</td></tr><tr><td>Website Development</td><td>$1,500</td><td>1</td><td>$1,500</td></tr><tr><td>Graphic Design</td><td>$300</td><td>1</td><td>$300</td></tr></tbody></table>Always include subtotals, taxes, and discounts if applicable. Transparent itemization helps your client understand the value of each charge.<h3>Payment Terms and Instructions</h3>Provide accepted payment methods — bank transfer, credit card, or direct deposit — and specify routing details. Include your late fee policy or early payment discount in your customizable invoice template.For example:“Payment is due within 30 days of the invoice date. Late payments are subject to a 2% monthly interest charge.”Clear payment instructions help avoid misunderstandings and encourage prompt settlement.&nbsp;<h3>Additional Sections and Optional Add-Ons</h3><ul><li>Terms and conditions:&nbsp;Reference the contract or project agreement.</li><li>Retainage or holdback:&nbsp;For contractors in construction or similar industries.</li><li>Notes or disclaimers:&nbsp;Add remarks such as “Please contact us within 7 days for any discrepancies.”</li><li>Attachments:&nbsp;Include supporting materials like receipts or progress photos.</li></ul><h2>How to Use and Customize the Downloadable Contractor Billing Template</h2>Our free contracting invoice template is available as a .docx file, so that you can easily import and edit it into common editors like Microsoft Word and Google Docs.Steps to Use:<ol><li>Download&nbsp;the file and open it in your preferred program.</li><li>Customize&nbsp;with your logo, color scheme, and fonts to match your brand identity.</li><li>Update the&nbsp;business, client, and item fields&nbsp;with accurate details.</li><li>Use a logical&nbsp;file-naming system, such as “Invoice-ClientName-Date,” to stay organized.</li><li>Save each invoice as a locked&nbsp;PDF&nbsp;before sending for a professional look.</li></ol>You can easily adjust columns to accommodate hourly rates, materials, or flat-fee projects. Consistency builds client confidence and makes bookkeeping tracking easier.<a href="https://assets.contentstack.io/v3/assets/blt5aaad8b5e90091d6/blt3139fc8a241ea93f/6900c27d772cdc61b28b79f0/Contracting_Invoice_Template_for_Small_Businesses_-_1-800Accountant.pdf" target="_blank">Download your free Contractor Invoice Template here</a><h2>Best Practices for Contractor Invoicing</h2>Efficient invoicing isn’t just about the document — it’s about how and when you send it.<h3>Send Invoice Promptly</h3>Send invoices immediately after completing a project or milestone. Waiting weeks can delay payments and confuse clients.&nbsp;<a href="https://www.forbes.com/sites/melissahouston/2024/02/05/the-crucial-role-cash-flow-plays-in-business-success/" target="_blank">Prompt billing improves cash flow</a>&nbsp;— a vital aspect of keeping your business healthy.<h3>Clear Communication and Transparency</h3>Before starting a project, align with your clients on<ul><li>Scope</li><li>Pricing</li><li>Payment terms</li></ul>Attach receipts or project summaries to validate charges. Transparent communication fosters trust and reduces billing disputes.<h3>Invoice Follow-Up and Tracking</h3>Maintain a simple tracking sheet or use software to record invoices:<ul><li>Sent</li><li>Paid</li><li>Overdue</li></ul>Regular follow-ups demonstrate professionalism and help to prevent overlooked payments. Track “days sales outstanding” to measure how quickly you collect cash after billing.If you’re managing multiple clients, 1-800Accountant’s tax-deductible full-service&nbsp;<a href="https://1800accountant.com/services/bookkeeping" target="_self">bookkeeping solution</a>&nbsp;can help automate invoice tracking and reconcile payments for tax time and throughout the year.<h3>Avoid Common Invoicing Mistakes</h3>Common invoicing errors that you should make every effort to avoid include:<ul><li>Forgetting to include all line items or tax amounts.</li><li>Failing to specify payment terms.&nbsp;</li><li>Using inconsistent or non-unique invoice numbers.</li><li>Omitting due dates or late-fee terms.</li></ul>Double-check every invoice before sending it to avoid payment delays.<h3>When to Move Beyond a Professional Invoice Template</h3>As your business grows, you will likely need to transition from manual templates to automated invoicing software or to professional support. Platforms can:<ul><li>Integrate with accounting tools.</li><li>Send reminders.</li><li>Manage recurring invoices.</li></ul>At that stage, partnering with a professional service built for small businesses like 1-800Accountant can save time and ensure your invoicing ties directly to your bookkeeping and tax compliance workflows.<h2>Sample Walkthrough</h2>Here’s how the 1-800Accountant small business invoice template for contractors looks when completed:Example Scenario:<ul><li>Business:&nbsp;Apex Creative Solutions</li><li>Client:&nbsp;Brightview Marketing</li><li>Services:&nbsp;SEO, Video Production, and Web Design</li><li>Subtotal:&nbsp;$5,300</li><li>Tax (10%):&nbsp;$530</li><li>Discount (7%):&nbsp;($371)</li><li>Grand Total:&nbsp;$5,459</li></ul>Accepted Payment Methods:&nbsp;Direct Deposit or Credit Card Due Date:&nbsp;November 15, 2025This sample mirrors the structure of the downloadable invoice and can be adjusted for any type of project — from construction to creative services.<h2>Next Steps for Invoicing</h2>A clear, professional contracting invoice template helps you get paid faster, stay organized, and simplify bookkeeping responsibilities. It also serves as the foundation for accurate cash flow tracking — a crucial factor in sustaining business growth.<a href="https://assets.contentstack.io/v3/assets/blt5aaad8b5e90091d6/blt3139fc8a241ea93f/6900c27d772cdc61b28b79f0/Contracting_Invoice_Template_for_Small_Businesses_-_1-800Accountant.pdf" target="_blank">Download your free invoice template</a>&nbsp;today to start standardizing your billing process. For expert help managing invoicing, bookkeeping, or taxes, schedule a free 30-minute consultation with&nbsp;<a href="https://1800accountant.com" target="_self">1-800Accountant</a>&nbsp;for personalized support tailored to your distinct business needs.Understanding&nbsp;<a href="https://oregonsbdc.org/small-business-accounting-using-a-cash-flow-statement/" target="_blank">cash flow</a>&nbsp;helps lenders assess your liquidity and ability to repay. With the right systems in place, you can confidently manage both invoicing and financial planning.<h2>FAQ / Additional Considerations</h2><h3>What if my client requests a different invoice layout?</h3>Fulfill your client's invoice request by adjusting the free template’s columns or colors to fit client preferences — just keep essential data like invoice number, dates, and totals visible.<h3>How do I handle deposits or partial payments?</h3>Handling deposits or partial payments is relatively straightforward. Include separate line items for deposits received or balance due. Then update the invoice after each payment for transparency.<h3>Do contractors need to charge sales tax?</h3>Whether contractors need to charge sales tax depends on your state and the nature of your service. Check local tax rules or consult an accountant for clarity on this front.<h3>Are invoices legally binding?</h3>An invoice alone isn’t a contract or legally binding, but it documents agreed-upon terms and can serve as supporting evidence in disputes.<h3>How long should I keep invoice records?</h3>Retain digital or paper copies for at least seven years for audit and tax purposes. Organized recordkeeping also makes filing easier each April.&nbsp;

Getting paid on time can make or break cash flow, yet many service-based professionals lose income or risk damaging client relationships due to unclear or incomplete invoices. Missing details, inconsistent billing formats, or vague payment terms can all lead to delays and disputes, ultimately straining your operations.

Blog Thumbnail_Contracting Invoice Template for Small Businesses_51200x630_1.png

Contracting Invoice Template for Small Businesses

Excepteur sint occaecat cupidatat

JOIN NOW!

Your small business resource for accounting, bookkeeping, and taxes from our experts.

Accounting, Bookkeeping, & Tax Blog

Screenshot_2023-08-14_at_1.36_1.png

CLP_JoinUs_Testimonial_WomanBlueBackground_3.png

Huong T
“Excellent first call, very informative. This is my third business … this time  I will ease the burden and use 1-800Accountant [for accounting]”

By clicking "Confirm My Appointment" you agree to our <a href="https://1800accountant.com/terms-of-services" target="_blank">Terms of Service</a>. This includes permission to communicate with you about your appointments via phone, email, or SMS. If you prefer to opt-out of SMS communications you may uncheck this box