Posted by Gabe Solomon on Aug 3, 2013 5:46:00 PM
I want you to love freedom.
Love the freedom that a freelancer life provides. Love the flexibility to pick and choose where you work, how you work, and for whom you work.
Oh… and I want you to love the financial rewards of freelancing too.
But just like everything in life that looks and sounds wonderful and seems like it’s the answer to all your hopes and dreams… I want you to understand the challenges and watch-outs that come with being a freelancer.
Read on to learn how you can navigate the path of a freelancer career so you can enjoy the benefits it provides.
First, the disclaimers: This is not legal, tax, accounting advice or life coaching. Nor is it a “how to avoid taxes” article. Finally, we’re assuming a correct classification as a freelancer is not in question.
This is a though-provoker and a conversation starter . We want to inspire you to start your learning journey (if you haven’t already) to be a professional and well-informed freelancer.
Am I A Freelancer?
Just because you think you’re a freelancer and a client calls you a freelancer, doesn’t mean that you are a freelancer.
If your client or their staffing/payroll service is paying you via a W-2, then you’re not working as a freelancer. A W-2 is reported to the IRS as employee wages and signals an employee/employer relationship, even if you thought you were working as a freelancer.
This limits the amount of business expenses you can claim when you prepare your taxes. It also increases the amount of control the client or agency has over you and how you work.
How do you know if you’re being paid as an employee? Easy… if you fill out a W-9, you will be paid as a freelancer, you will receive a 1099 at the end of the year, and you will be able to exercise all of the financial benefits of being a freelancer. If you fill out a W-4, you will be paid as an employee and will be limited in the benefits of freelancing.
Freelancer vs Employee
Employees have relative stability from their employers in the form of regular pay intervals. The company provides the tools and training for the employee to perform the tasks the company wants completed. And the employee has access to a package of employer-chosen benefits. If an employee is fired, then the employee can file for unemployment. However, the employee has little negotiating room on their salary, is very limited in the business expenses they can exempt from their taxes, and can be restricted from working for other employers.
A freelancer is a self-employed professional operating just like a small business. You can’t claim unemployment if you don’t have a paying contract and you assume the financial risks that come with being a business. But, you choose the projects and companies that interest you. You choose which skills you want to develop and market to potential clients. You choose the benefits you want from your provider of choice.
While it is “easier” to be an employee and have those choices made for you, it comes at a steep price… your freedom.
Advice For Freelancers
Do your homework. Whether you’re new to freelancing or you’ve been doing it for over 20 years, we recommend you commit to staying informed about all things “freelancing”. Spend at least a half-day each month completely focused on reading the latest articles and books about the subject. Go to the public library, a bookstore, or go online.
Find a qualified tax professional. You can choose a fully-qualified CPA or an experienced tax preparer. Regardless, make sure you have someone you trust to not only prepare your taxes, but to also give you advice on making sure you’re maximizing your benefit while staying within the rules.
Consider getting a business license. This link lists the place to start for all 50 states. It’s not a requirement, but it does give you an extra layer of protection by sending a clear signal that you intend to operate as a self-employed professional and that you are due the benefits of operating as a business. If you aren’t sure which license to get, call the help line and inform them that you want to register as an independent contractor. Your tax professional may also be able to help.
MertzCrew and Freelancers
Like Peanut Butter & Jelly, MertzCrew & Freelancers go great together! We are 100% focused on freelancer contracting and only pay via 1099. Our founder started almost 20 years ago as a freelancer and when he became a producer, he contracted freelancers for his own projects. We’ve experienced both sides of the freelance relationship and know what both parties need to successfully execute a contract.
We are an Agency of Record and have performed the legal due diligence to be sure that we preserve your status as an independent contractor when working on projects. We pay you as an independent contractor and issue 1099s. We pay freelancers within 30 days of the project’s completion.
It’s about Peace of Mind. We are big proponents of freedom and that is what inspires us to do what we do. You have a right to work how you want to work as long as you follow the guidelines. We are with you every step of the way and will continue to advocate for you to have your freedom.
Topics: AV Techs