Office Hours:
Monday to Friday
9 am to 7 pm EST
Tel: 212.281.3295
Address:
P.O. Box 2688
New York, NY 10185-2688
Top Ten Tips for Being Self-Employed
1. Use written agreements with clients. Courts are crowded with lawsuits filed by people who entered into oral agreements and disagree about the terms. A written agreement even a very brief one will help avoid misunderstandings.
2. Preserve your independent contractor status. If the IRS determines that you are really an employee, not an independent contractor, you could lose valuable tax deductions. Preserve your status by using written agreements with clients and insisting on controlling how you work.
3. Keep good records. Self-employed people need to make recordkeeping routine to avoid getting into trouble with the IRS and to have an accurate idea of how their business is performing.
4. Open a separate business bank account for your business. This will help avoid problems with the IRS and make it easier for you to keep track of your business income and expenses.
5. Take advantage of tax breaks for the self-employed. Take advantage of tax breaks available for the self-employed for example, deduct business expenses such as the cost of business equipment. You can also set up tax-advantaged retirement plans and Medical Savings Accounts and deduct the amount of your contributions.
6. Don't fall behind on tax payments. Since as an independent contractor you don't have an employer to withhold and pay income and Social Security taxes, you must pay them directly to the IRS, normally in the form of quarterly estimated taxes. If you fall behind, you could be faced with a huge tax bill on April 15.
7. Price your services wisely. Many self-employed people charge too little, especially when first starting out. Don't be afraid to charge more than employees get for doing similar work. The self-employed are supposed to be paid more than employees typically, at least 20% to 40% more to make up for the fact that they get no benefits and must pay all their own taxes.
8. Make sure you get paid. Help avoid payment problems by using written agreements with clients, doing credit checks before you accept work from new clients, obtaining down payments and promptly invoicing your clients.
9. Be considerate to your neighbors if you work at home. Although many cities' zoning laws bar most businesses from residential neighborhoods, these laws are rarely enforced unless your neighbors complain. Try to avoid neighbor complaints by keeping noise, deliveries and other disruptions to a minimum.
10. Consider incorporating. Many potential clients, fearful of IRS audits, prefer to hire self-employed people who have formed their own corporations. Small corporations are also audited less often by the IRS than sole proprietors.
About the Author
Jacquéline Edwards is a Business Solution Analyst with over 15 years experience for Business Pipeline, Inc., a Business Development and Professional Training Firm designed to assist entrepreneurs, small businesses and corporations in key methods, strategies, support and resources to help start, manage and grow a business.
©1997 - 2007 Business Pipeline, Inc. All Right Reserved
