Freelancing in Post COVID-19: Income & Tax Opportunities
Why is there unlimited opportunity for the remote freelancer in the new world of pandemic shutdowns and limitations? Consider what has been happening in the business world, from small business to mega-corporations. They have had to send workers home, abandoning their cubicles for their home desks or kitchen tables.
Step 1 of the New Remote Work World
What many of these businesses discovered was that their worker productivity did not drop, in fact it increased in many cases. They were getting the same level and quality of work or better, even though they were working unsupervised at home. This led many companies to consider the possibility of making the work-from-home arrangement permanent for many employees.
It did not hurt that they began to look at the large rents they were paying for worker floor space for those offices and cubicles. Then there were the support areas, like the snack bar, coffee room, and others. The cost of cleaning services also became an item of interest.
All of this came together to help Microsoft to announce that they would be converting a large portion of their workforce to remote workers. Even allowing for the costs of helping them to upgrade their home Internet and other office necessities, it was far less expensive than office space and associated expenses.
Step 2 – Conversion from Employee to Independent Contractor
Once the remote worker productivity question was answered in a positive way, companies began to look at some employed positions that could be better served at lower cost with freelance independent contractors. This became of interest particularly when it came to shorter term projects and the difficulty at times in transitioning employees to different new projects. This was especially true when it came to projects with differing required skill sets.
Mass layoffs are not expected, but as employees transition out many companies are considering hiring independent contractor freelancers. This opens massive opportunities for those who want to be self-employed but have not taken the plunge yet. As an independent contractor, you have more control of your life, time at home, when and how you get the job done.
Your income as a freelancer is limited only by your business skills, time management, and how you go to market and build a client base. The truth for many is that the have more of a problem limiting their work so that they can enjoy their life more. They do a great job in building up their client base and then they find that it is more challenging to control their workflow and keep their best clients.
Step 3 – Keep More of Your Money
Once your business is established, you can investigate the many strategies available to the small business owner to cut their tax liabilities while increasing their nest egg for retirement. The self-employed freelancer or independent contractor has choices in the structure of their business. From a sole proprietorship to an S-Corporation or the LLC, Limited Liability Company, there are different taxation advantages not available to employees. Though not all, they include:
Home office deductions
Retirement accounts that cut tax liability now
Business deduction for vehicle use
Deduction from income for all business-related expenses
Possible tax benefits for hiring family members
With thousands of pages in the U.S. tax code, there are other advantages for the small business owner, and a tax professional’s guidance can greatly increase the percentage of your income that you get to keep after taxes.
The bottom line is that current trends in growing outsourcing and remote work relationships will provide amazing opportunities for anyone who wants to take their skills out of the employee pool and put them into their own business. You will make more, and with tax guidance you’ll keep more while building a comfortable retirement.
Companies expected to outsource more due to Covid-19 Pandemic: NTT – The Economic Times
Businesses focus on outsourcing as a Covid-19 survival strategy – InformationAge
Outsourcing relevancy in a post COVID-19 environment – Deloitte