Everyone has come across questions about the type of activity in questionnaires. And if an office employee, without any hesitation, ticks the box “full-time” or “part-time,” a freelancer may wonder. Is he self-employed? Or solely a freelancer? Or should the “unemployed” box be checked? This article discusses the differences between freelancers and self-employed, whether freelancers need to pay taxes, and how Voiset will make your life easier. It will be useful for you to read our article about time management in freelancing, there you will learn new tips that will help you to be more organized.
What is the difference between self-employed and freelancers?
When you take an order from a client, you can already consider yourself a freelancer. However, this is on the condition that the client came to you (or you found him) and not to the company of which you are an employee. Freelancers can be considered artists, painting portraits at subway crossings, and schoolchildren, solving tests for classmates for money. Freelancers are interior designers, ready to think through the furnishings of your apartment, and nanny-student, ready to sit with your child for five dollars an hour. However, of course, not all of the above freelancers are self-employed.
The term “freelancing” has its roots in medieval times, when freelancers could be considered freelance soldiers. They fought for the army that offered them more money, hence the term itself. Not much has changed since then, and a freelancer today can be considered a person willing to fulfill a certain order that meets his price expectations.
Who is self-employed? The IRS definition of self-employed includes all self-employed people, including a contractor, as well as members of partnerships. So, it is a more formalized term that implies tax compliance. A self-employed person is a person who does not keep in the shadows but works legally. At the same time, a self-employed person may well be a freelancer.
Different countries have their legislation; in some countries, it is necessary to register separately to become self-employed; in some countries (as in the USA), it is enough to file declarations and pay taxes on time.
Do I have to pay taxes as a freelancer?
U.S. law says that if your annual net income is more than $400, you must pay tax. And you will pay it as a self-employed person.
What if I am a freelancer and do not want to pay taxes? Such reluctance is common, but several pitfalls make the status of “self-employed” preferable to “freelancer.”
Three reasons for a freelancer to be self-employed:
1. It's more relaxed that way.
Official work is not only about paying taxes, it also guarantees a fair resolution of disputes that may arise in the course of work;
2. Opportunity to take on more projects.
Some companies will refuse to cooperate with a freelancer if he is not ready for official cooperation. Therefore, if you are considering freelancing as a way to earn good money and scale your business in the future, it is better to avoid “shadow” schemes;
3. Health insurance.
Generally, tax strategies in most countries include paying a percentage of income as a contribution to health insurance. The availability of the latter is a plus in favor of formal interaction with clients.
How and where can I pay taxes as a freelancer?
All the information you need about where to pay taxes as a freelancer in the US can be found in this article. It also has all the most important links. So now let's answer the question, “How to pay taxes to a freelancer?”
A freelancer's tax strategies can vary:
- Some people use a “last chance” strategy, putting off filing their returns until the last minute, similar to what they do with paying taxes.
- Some use third-party services because they believe it is impossible to understand the intricacies of U.S. tax law on their own.
- Someone chooses the “binder of documents” strategy, storing all the documentation that may be needed in one place and then allocating a few days to deal with the accounting.
- There is another freelancer tax strategy that keeps deadlines in mind, has all the necessary checks available for tax credits, and always addresses all tax issues on time and quickly. This strategy involves installing Voiset!
How can I use Voiset to organize my taxes and remember to pay them?
Freelancer's main challenges in financial management and tax planning:
1. We need to organize the work with each of the many clients
A freelancer usually has not just one client, but several at the same time. And some clients are replaced by others. Each one has its own documentation, receipts, tasks, etc. A pile of information accumulates, and sorting it out requires much effort.
2. It's hard to carve out time for tax planning
In order to focus solely on tax reporting, freelancers need to pause their main client work. This can be extremely difficult in situations where projects are about to deadline.
3. We need to remember to remember tax days
Keeping your tax filing and payment date in mind all the time is a difficult strategy to implement.
4. Difficulties in understanding net income
Not all freelancers record how their income changes from month to month and what their expenses are. However, very many self-employed people carry out their activities in a home office, which means that they can claim a large tax deduction. To get the latter, you need to put all your documents in order and keep a number of important receipts.
Voiset solves ALL of the most important freelancer tax planning problems:
1. Gives you the ability to organize and store all documents for each of your clients
Create a workspace for each new customer, and record not only work tasks in it but also save receipts. When you need this information - you will get it in a couple of seconds for any time period.
2. AI will determine the perfect time in your schedule for tax returns
Most freelancers' work is unstable: one week, you may have a heavy workload, and the next, you may be free. Voiset, powered by artificial intelligence, can help you utilize low-workload periods to take your tax planning in stride. You will no longer have to pause projects and postpone due dates because your tax returns are due! You'll have all the documents you need to prepare in advance!
3. Voiset will remind you of tax days
Voiset won't let you forget that it's tax day! Even if you have a busy schedule, Voiset will correctly remind you to prioritize your tasks.
4. Help you understand your actual net income and get a tax deduction
The costs of buying a new laptop and internet can be deducted from your income if you are, for example, a graphic designer working from home. However, not everyone takes advantage of this. As a result, many freelancers pay more tax because they don't want to deal with tax reporting.
However, Voiset has made it easy to get a tax deduction! This planner combines the two sides of your life - personal and work. So not only save checks from your clients in Voiset, but also have a separate area to record your home office expenses! When it's time to fill out your tax return, you won't have to search for your receipts - you'll have all the documents you need at your fingertips!
Whether you're a freelancer or self-employed (or both), Voiset can help you organize your life better.
Working for different companies is a special format of life that requires switching between many tasks. When a laptop breaks down in the office, an employee calls an IT specialist, and when a freelancer's laptop breaks down, he needs to find a service center and allocate his time to solve the problem. Similarly, with taxes, most often, the freelancer personally engages in their payment, distracting them from the main work on projects.
It is critical that the freelancer has an assistant. One who would take care of some of the problems and remind them of important tasks. By installing Voiset, you will get just such an assistant - smart, correct, able to listen to you, memorize, and record every word! And isn't that a reason to install Voiset right now?
