Freelancer: Examples, Taxes, Benefits, and Drawbacks of Freelancer

In this article, you will learn about What is meant by a freelancer step by step. So without much to do, let’s get started.

What Is a Freelancer?

A freelancer is a person who works as an independent contractor and gets paid on a project-by-project or task-by-task basis, typically for short-term projects. A freelancer is not an employee of a company and is, therefore, free to work on multiple projects simultaneously for different people or businesses unless they have a written contract committing them to do so until a specific project is finished.

Gig workers are another name for freelancers.

KEY TAKEAWAYS

• A freelancer is an independent contractor who receives payment for each project or activity they complete, usually for a brief period of time.
• The opportunity to work from home or from a non-traditional workspace, a flexible work schedule, and a better work-life balance are advantages of freelancing.
• An independent journalist who reports on stories of their own choosing and then sells them to the highest bidder is an example of a freelancer.
• Freelancers typically do not receive benefits from their companies like health insurance or retirement plans because they are not considered employees.
• The term “freelancer” can also refer to gig workers.

Recognizing freelancers

Generally speaking, freelancers are regarded as independent employees who, depending on their schedule, may work on their contracts full-time or as supplemental full-time jobs. As independent contractors, freelancers often need signed contracts before starting work and agree to a set payment based on the amount of time and effort needed to do the assignment. This price could be a fixed rate, a fee determined on the number of hours, days, or projects, or it could take some other form.

A freelancer typically works in the creative, skilled, or service industries, such as in media, marketing, music, acting, journalism, video editing and production, illustration, tourism, consulting, website development, computer programming, event planning, photography, language translation, tutoring, catering, and many others.

Taxes and Freelancers

Freelancers are classified as self-employed by the Internal Revenue Service (IRS). Unlike employees of a company, self-employed individuals do not have their taxes deducted by the business they are working with. Therefore, the freelancer is solely responsible for paying income taxes, which must be paid in advance in quarterly payments. A freelancer is liable for the self-employment tax that the IRS mandates in addition to the income tax.

Freelancers are required to pay self-employment tax as both an employer and an employee because the IRS views them as business owners. The rate of Social Security tax is 6.2% for employers and 6.2% for employees in 2022 (the rate for both employers and employees is expected to remain the same in 2023). A freelancer or other independent contractor would pay tax at a rate of 6.2% + 6.2% = 12.4% because they are both an employer and an employee.

In any given tax year, a freelancer who earned $400 or more is subject to the self-employment tax. One portion of the levy goes toward Social Security, and the other portion goes toward Medicare.

Only the first $147,000 of income earned in 2022 is subject to the Social Security tax; in 2023, the taxable ceiling will rise to $160,200. The self-employed worker’s Medicare tax rate, which is 1.45% for both organizations, is 2.9%. As a result, the total self-employment tax rate that a freelancer must pay is 15.3% (12.4% + 2.9%).

Some tax deductions available to business owners for their business costs may also apply to freelancers. These must be regular and necessary costs (O), per the IRS, in order for the business to operate.

As a result, a freelancer would not be allowed to deduct an expense they would ordinarily incur for their own personal use. Deductions that can be made include rent and utility costs for a home office, travel expenses to and from a job, client entertainment charges, the cost of training programs or certifications specifically related to the business sector, and more.

Tip: Since no taxes are deducted from their paychecks, freelancers must pay estimated income taxes to the IRS quarterly in advance.

Freelancers in the US are handed a 1099-MISC tax form instead of a W-2 form for income tax purposes, which normally does not include any tax withholdings. Each client who hired a freelancer to work for them during a specific tax year will send them a 1099-MISC form.7 Advantages and

Advantages and Disadvantages of Freelancing

A better work-life balance, the opportunity to work from home or other unusual workspaces, and a flexible work schedule are all advantages of being a freelancer. Workers who have been laid off can profit from freelancing, which lowers the rate of unemployment in an economy as a whole.

Constraints include difficulty finding new employment frequently and anxiety about future financial security. Additionally, there are fewer employer benefits like insurance and retirement plans, as well as perhaps lower per-hour pay when compared to wage earners who are employed. Freelancers are ineligible for unemployment insurance, with the exception of individuals who met the requirements for Pandemic Unemployment Assistance (PUA) during the pandemic.

What is Freelancing | What Does it Mean to Freelance? | Freelancing Tutorial

Various Freelancers

An independent journalist who covers stories of their own choosing and then sells their work to the highest bidder is an example of a freelancer. Another illustration is a web designer or an app developer who only works on a project for a client once before moving on to another.

Other fields where independent contractors frequently work include:

graphic design and illustration;

marketing, media, and public relations;

financial assistance (such as tax preparation);

writing, editing, and proofreading;

photography and videography;

data entry;

software programming and beta testing;

website design; and sales.

•Gig work is a subset of freelancing that is defined by being organized through online platforms and mobile apps, including driving for ridesharing platforms, food delivery, physical labor, and care work.

Where Can I Find Freelance Work?

In addition to being advertised in numerous locations online and in print, freelance jobs can also be found through networking, word of mouth, and recommendations. It’s common to locate freelance work on websites like UpWork, LinkedIn, Craigslist, and Fiverr.

Is Freelancing a Career Option?

While many people use freelancing as a side gig or “gig,” some are able to make it their full-time job. A freelancer must possess the necessary skills, drive, and resilience to deal with unpredictable income streams.

Are Freelancers Self-Employed?

Freelancers typically operate as independent contractors; as a result, their earnings are regarded as self-employment income and are reported on IRS form 1099. Additionally, freelancers are required to pay the full Social Security contribution, which includes the half that an employer would typically pay.

This is about What is meant by a freelancer, and we hope you have learned something from this article and share your opinion about this article. What do you think about it, if you think this article will help some of your friends, do share it with them.

READ NEXT

What is Freelancing & What Does it Mean to Freelance?

How do I start freelancing?

What type of work can I do by freelancing?

Why are people freelancing?

How Does Freelancing Work?