The independence and liberation of working for yourself is making more and more people decide to be self-employed across the United States.
Searching out the work you want to do is what drives many, rather than being assigned task after task by a manager which brings little joy or interest.
There are a number of different forms of self-employment including:
- Independent Contractors
These are people hied by firms to carry out specific jobs/projects for clients. They are paid for am agreed outcome or workload and are not subject to workers’ compensations.
Examples of independent contractors include journalists, plumbers, electricians, accountants and lawyers.
- Sole Proprietors
A sole proprietor refers to a business which is owned by one person. This does not necessarily mean they work alone though; they can hire employees to help them.
The owner is entitled to the full share of the profits of the business though is also responsible for all unlimited losses that may occur.
These are an arrangement between two or more individuals to manage and operate a business together. They share profits and loses as well as have shared responsibility for tax payments.
Partners ca take different roles, like silent partners who contribute financially though not on day-to-day operations, while some may have limited liability as well as a lower share in profits.
Another benefit to being self-employed is your entitlement to a number of different tax deductions.
- Home Office Deduction
If you work from your home, you have the option to claim for deductions in the household bills. For example, a portion of your mortgage or rent, utilities and maintenance can be deducted.
If you use around 10% of your house as a home office, you can apply for 10% of the expenses which comes with work for the year. IRS Publication 587 outlines the scenarios this applies to.
- Continuing Education
When looking to build your knowledge on your work subject you may be entitled to discounts on education in order to provide better goods or services.
The costs of text books, supplies and transport can all potentially be claimed as a tax deduction should it relate to your line of work.
Should you require using your personal car for work purposes, self-employment tax deductions could help with the running costs of your car.
By keeping a milage log of the number of miles you drove during the year for business purposes, you can calculate the total with the IRS milage rate to identify what you can deduct.
- Phone and Internet Costs
Whatever role you carry out in a self-employed capacity you will no doubt need at least one of, if not both of a phone and the internet.
By registering a business phone or internet connection in your house you will be able to deduct your entire bill. If you use your home internet access of cell phone, you can deduct the percentage used for business.
Using IRS Schedule C you can calculate your net earnings each year from self-employed work. From here you will be able to identify the total required to be paid in tax.
Taxes are calculated on a pay-as-you-go rate in the United States so there is no need to wait until the end of the year to input your information.
This way you are risking penalty fees for late payments as well as making the process longer and more complicated when you could be bringing in more work.
The opportunity to work in your desired role, to be responsible for your workload and commitment is a big benefit to being self-employed.
You are able to make the big decisions on the direction of your work as well as when and how to complete it.
For many, taking control of their work life is a key reason for moving away from the traditional nine to five office workplace.
With the right drive and determination to succeed it can be the perfect way to earn and live.