Are you a freelancer? Do you have a paying side gig—or three? If so, you’re not alone.
At the Bureau of Labor Statistics’ last count in May 2015, there were 15.5 million self-employed people in the US—up an impressive million from 2014’s assessment. A separate study by software company Intuit projected that by 2020, the number of independent contractors would total more than 60 million—a whopping 40 percent of the US workforce.
Are you one of the millions supporting the gig economy? Or do we have it all wrong—is the gig economy supporting the rest of the workforce?
I like to think of it as a symbiotic relationship (go ahead, channel your high school biology notes). Professionally, we’re all getting precisely what we need and nothing that we don’t. Symbiotic relationships are nature’s win-win situations.
Want to win more? Of course you do. Here’s your freelancer’s guide to the gig economy.
So What Exactly Is a “Freelancer”?
Actually, it’s really not necessary to split hairs about what defines a freelancer and an independent contractor. They are both either an individual or small business committed to providing services or goods to another business via a verbal agreement or contract. Some reserve the term “freelancer” for more artistic or design-oriented tasks like writing or design, leaving the term “independent contractor” as a catchall for the rest of the workforce.
Whether you identify as a freelancer or an independent contractor, you’re still pretty much doing the same thing—using your skills to make money on your own terms. For the purposes of this guide, the terms “freelancer” and “independent contractor” will be interchangeable.
Uber driver? Freelance writer? Personal trainer? Whatever your skill or talent, this guide is for you.
Four Habits of Highly Successful Freelancers (Regardless of Industry)
To be successful in any industry, there are a few key considerations for freelancers:
- Focus on maximizing your earning potential. ALWAYS remember that you deserve to get paid what you’re worth.
- Do everything in your power to position yourself in the way of stable assignments. Got a good thing going with one client? Good for you! Don’t lose that lifeline, but take the blinders off. Remember to be on the lookout for other opportunities so that your work well (and your bank account) won’t run dry.
- Ask for referrals and references. A good personal referral or lead from a happy client is the equivalent of a freelancer’s golden ticket.
- Consider joining the Freelancer’s Union. It’s free, and you’ll gain both resources and connections. (If you’re in the market for health care benefits, they offer insurance plan options as well.)
Succeeding in Specific Industries
Freelancers working in specific industries can also benefit from the following advice:
If you’re a young Ph.D. or recent graduate trying to enter the academic workforce but full-time opportunities aren’t exactly knocking, resist the urge to take unpaid writing, editing, or teaching gigs in exchange for the promise of advancement. Rather, focus your energies on building a steady, stable career that pays; remember, adjunct work isn’t a long-term solution. As a freelance academic, you’ll have the advantage of choosing a location you love and being able to stick around, rather than having to move thousands of miles away for full-time faculty positions.
If you’re a multimedia freelancer—i.e., web designer, graphic artist, writer, editor, photographer, etc.—you should focus on using that same media to promote your brand. Coincidentally, your brand is yourself. Social media, for example, is an incredibly powerful—and free—tool you can use to promote yourself and your work. You can use it to post your portfolio and join professional groups and organizations. If your name is not at least somewhat visible, how will you woo prospective clients? Show them why they should believe in you enough to hire you.
For tech startups, community is everything. And, like in most businesses, the people you know matters. If you’re a tech freelancer, the Internet provides a phenomenal soundboard for you to tout your skills and meet “virtually” with seasoned executives or bold entrepreneurs who just happen to be looking for someone with the precise skills you’ve got to offer. In addition, the tech startup industry can come with a lot of entrepreneurial leverage for freelancers to get in on the ground floor of young companies—or eventually launch their own.
What About Taxes?
To paraphrase Benjamin Franklin, you can’t be certain of anything in the world besides death and taxes. The process of filing taxes as an independent contractor is a whole different ballgame compared to that of a full-timer.
For the most part, if you are self-employed—that is, you are an independent contractor, sole proprietor, part of a business-operating partnership, or own your own company—you need to file taxes both quarterly and annually. (Note that if your business profit is under $400, you won’t need to file a tax return.) Freelancers must pay both self-employed tax (called SE tax) and income tax. Here are some things you need to know:
- Use a 1040-ES form to calculate the payment amount for your quarterly SE taxes. (This covers your obligation to Social Security and Medicare.)
- For your annual submission, you’ll need to fill out a 1040 form to cover your income taxes. If you have contracted with multiple companies, those companies are obligated to provide you with 1099s for that work. Use the information from the multiple 1099s to fill out a single 1040.
- You may claim half of your SE tax obligation as a 1040 deduction in order to minimize your tax burden. See Figure 1 below for a visual example of how this works. (Note that there are additional deductions, like allowances for your home office or mileage. Read Business Insider’s freelance tax suggestions for more information and definitely check with your accountant for tax advice).
Figure 1. Source: Formswift
The gig economy is packed with opportunistic and self-motivated people like yourself, and statistics prove the freelance pool will just keep getting deeper. If you fine-tune your craft, never stop learning, and insist on getting paid what you’re worth, freelancing can work for you to satisfy your short-term or even long-term professional goals.
I’m curious—regardless of what industry you’re in, what have you found to be an absolute freelancing must? (A good accountant, maybe?) What tips would you offer all the newbies out there? What’s been the most challenging part about going the freelancing route? What’s been the most rewarding? I’d love to hear your thoughts.
Additional Information on this Topic:
The Gig Economy Shows How Desperate American Workers Are
The Freelance Surge Is the Industrial Revolution of Our Time
Technical Skills Essential for Digital Marketers of the Future [Survey]