I spent two hours yesterday renegotiating with the IRS an installment agreement. While I was on the phone waiting to speak to an agent, I started thinking about how I got into this tax pickle. It all started getting downsized and getting thrown into freelance world.
I’ve been freelancing for almost twelve years. There have been good years (pre 2008 financial crisis) and some tough years due to the economy. I often see on Facebook writers who are itching to quit their jobs and freelance. Many of the reasons they give is that they rather work for themselves; they’re not intellectually stimulated by their work. They want to write at home and not have to commute or dress up for their jobs. They want the freedom of choosing projects they like.
All perfectly good reasons, but you need to be realistic what a successful freelancing career demands. So I came up with the following list that will help decide whether the freelancing scenario is right for you:
1. Can you afford to quit your job? Seriously, if you’ve been laid off or downsized, as I was back in 2002, you won’t have any choice but to freelance while you’re looking for a new job. I was fortunate to have had a job that made decent money and had some savings. I found freelancing gigs –in marcomm–that paid well.
2. How much debt do you have? Although, I was paid well with these freelance gigs, I managed to accrue debt because right about the same time I was downsized as director of PR, my partner lost his job. I ended up being the primary income earner for two years. It took me five years to pay off the debt after negotiating with credit card companies. And don’t be fooled that once you’ve paid it off that it won’t return. Keep in mind that economies tank as do freelance gigs. As both my partner and I discovered in 2008.
3. Get used to living a simpler life. I don’t mean like a Tibetan monk, but weigh the costs of entertainment, clothing and accessories, make up and hair styling and so on. As typical New Yorkers we ate out a lot. It wasn’t super expensive, but as foodies we had to try the latest tapas or sushi bar, Ethiopian restaurant, or go out for brunch on Sundays. Thankfully, we know how to cook and invested in good appliances.
4. When you get paid set aside money for yourself and put it in a savings or retirement account. The rest goes to bills, taxes, and if you have anything left over a reward fund for birthday or end of the year.
5. Learn some basic bookkeeping skills. Keep accurate records of all your expenses. Learn what you can write off from your home office to travel expenses to classes to grow your current skills set to software that you need for writing, photography, graphic design and so forth.
6. You’ve been offered an on-site “freelance” jobs. If you are required to work on-site and you have supervisor who dictates hours, provides the office space, and materials, YOU ARE NOT A FREELANCER NOR AN INDEPENDENT CONTRACTOR. THIS IS A JOB. The IRS is very specific about this, and the company should be paying taxes and taking out for SSI. If a company does this, the IRS has a whistleblower program. Use it. Because you will be screwed in the long-run.
7. File quarterly. It’s a headache, but if you’ve been putting money away it won’t be so painful, plus you won’t be killed by interest and penalties.
8. Don’t depend on one good and consistent gig. Query, query, query so you can have a lot of work coming your way and have a steady stream of income (assuming the client pays promptly).
9. Weigh the opportunity costs of writing a long article for what amounts to pennies per word. Yes, it might be a new market you want to break in, but do you want to spend several hours researching, interviewing, writing and editing for $100.or less.
10. At some point you will be acting like a collection agency. Always invoice when you send your article. Don’t see a check in two weeks? Follow up with a polite email. Still no money? Ask for the accounting department’s contact information. Still no money? Get a lawyer.
None of this is new and has been said many times but they’re worth repeating and reminding yourself. Don’t make the same mistakes I made because I didn’t consider aspects that were beyond my control like the economy or a changing industry. Be smart and treat freelancing as your business. And don’t get discouraged. You can grow your freelance, but it doesn’t happen over night.
Freelancers: Anything else you’d like to add?