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Self Employed - Are you one of them?
By Sherman Bell | August 28, 2008
One of the most prominent questions that arise in our mind during the tax filing days is regarding our total liability. Often we are in a dilemma as to how to adjust that income generated from blogging or as some freelance work done over the weekends to supplement our monthly income. Often we are just confused as to what deductions and exemption we are allowed on our side incomes.
Quite a lot of people have made fortunes from their hobbies like stamp collection, artifacts collection, photography, copywriting etc. But most of these people were doing it after their job hours as just a time pass and to generate a few extra dollars.
As per IRS, a self employed person is the one who works wholly and solely for himself or herself and directly reaps all the benefits or suffers all the losses arising out of their decisions and products or services thereby offered. Usually such a worker does work based upon the specification of a client but has the liberty to decide how the service or product will be brought to its final shape.
A self employed person need not necessarily have a registered firm. An individual doing freelance copywriting or transcription or programming jobs can be considered as independent contractor.
Thus, as a freelancer you can operate out of your living room. But, if you decide to start a firm and employ some other people, you must get your company registered with the state government. A company basically represents a brand. It is no longer associated with an individual and the services or the product that you provide becomes a commodity which others want to buy because of its quality.
The moment you get your company registered, it becomes a brand name, something that if not preserved properly can lead to your downfall because if quality of your services or product is not good, people will not want to buy it.
But just because you now have decided to start a company and build a brand name you will rent an office in a posh commercial street and fill it with expensive and designer furniture. An office is a place where you design your product or offer your services from and how it looks really doesn’t matter as long as you can provide good quality.
You can always be a freelancer or an independent contractor even if you are involved in a 9-5 job. Whatever income you make apart from your work hours will be considered as income generated from independent contracts and will be liable to being taxed in the similar manner and not as your salary that you receive from your 9-5 employer.
More information can be found at www.irs.gov/business.
Topics: Taxes |
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