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The Downsides To Being A Freelancer
As someone who’s planning to transition to full freelance and independent contractor work, I’ll be the first to tell you that it’s great. If you do it right you can work from anywhere in the world, set your own schedule, and take on as much or as little work as you want. That doesn’t mean it’s easy, though. There are a lot of downsides to being a freelancer or an independent contractor, and you should know about them before you decide to make freelancing a career.
- It’s hard to find steady work. Not having enough work to hire full-time, year-round employees is a big reason why companies hire freelancers. Unfortunately for freelancers it means that even if you do pick up a fairly steady contract you could still have weeks or months without work. More likely, you’ll be working project by project. That means not only your workload, but also your income, is questionable.
- The benefits are non-existent. This is another reason why companies like to hire freelancers. They’re not full-time employees, and they’re not salaried, so they don’t have to do anything in terms of health insurance or retirement plans. You’ll have to take care of all that on your own. And paid vacation? Forget it.
- Taxes are terrible. When you’re a freelancer or an independent contractor you take care of all the tax issues yourself. These tax issues include an extra self-employment tax, and unless the freelance companies you’re working for are very accommodating, they won’t withhold any money for state or federal taxes. Because of this the government might make you pay taxes quarterly, and it also means that you’re not going to get a refund, you’re going to owe the government a check. Budget accordingly. If you’re interested in learning more about quarterly taxes, known as estimated taxes, see form 1040ES here: http://www.irs.gov/pub/irs-pdf/f1040es.pdf
- You work in order to find work. Instead of going into the same office every day, as a freelancer you’re going to be scouring the internet for jobs. That means hours, days, and even weeks of work before you find a job that will actually pay you.
These are the main downsides that I’ve noticed so far, but keep in mind that I’ve only been a freelancer for about six months, and I’m still working at my day job. These are just the downsides to being a freelancer than anyone considering entering the field may want to keep in mind.
In my opinion, however, the two biggest downsides to being a freelancer are the unpredictable income and the taxes. Unpredictable income is easier to work with if you have savings, but taxes are a nightmare. You have to jump through some hoops to determine if you need to pay quarterly estimated taxes, and then you need to jump through some more to find out how much you owe. At the end of the year you need to tie it all together with a bunch of 1099 forms, 1040ES forms, and other IRS paperwork. It’s hard, and I’m the first to admit I haven’t quite figured it out yet. Let’s hope I don’t get hit with a penalty for not paying quarterly estimated taxes this year.
On that note, if anyone has extra freelance tax advice, aside from going to a tax professional, I’d love to hear it. Other than that, these are the main downsides to being a freelancer that I’d recommend everyone keep in mind before they make the career jump.