Freelance vs. self-employed work is very similar. Both roles give you autonomy in how you work and what you work on.
Self-employed people tend to have more control over their projects and workflow.
Freelancers, also known as contractors, are often hired hands to get a specific project done.
And business logistics, such as insurance and taxes, are often quite similar for them both.
Jump ahead to learn:
While freelancers are always self-employed, self-employed people aren’t necessarily freelancers.
As opposed to self-employed workers who initiate their own projects, freelance workers typically follow the requests of clients.
Freelancers tend to work alone. They often work the hours they wish and take on multiple jobs with different clients.
The term self-employed is often associated with business owners. Many startup founders and business owners identify this way.
Self-employed individuals are their own boss. They decide what they work on, which hours they work, and how they work. Typically, they don’t take instruction from clients.
A self-employed person is more likely to have (or want) employees and they sometimes hire freelancers for help.
Whether you call yourself freelance vs. self-employed, business insurance needs remain the same for both.
Some self-employed professions like therapists, childcare services and construction workers are required to carry business insurance. A lot of freelance and self-employed jobs don’t require it, but it’s a good idea to have it to protect your business interests and personal finances.
Insurance transfers the risks associated with your business from your bank account to the insurance company. And it can help you look more professional and win more clients. NEXT policyholders can download their certificate of insurance (COI) 24/7 via web or app to show clients proof of your coverage.
Many freelancers choose general liability insurance coverage for its flexibility. For example, if your client trips on your toolbox and gets injured, liability insurance can cover resulting lawsuits or medical expenses.
Professional liability insurance is also good to have as a freelancer or self-employed individual. It can protect you if a client accuses you of making a professional mistake or missing a deadline that costs them money — whether the claim is warranted or not.
Other useful forms of coverage include commercial auto insurance (if you have a vehicle used for work), and workers’ compensation insurance if you have employees.
The government doesn’t make a distinction between freelancers and self-employed when it comes to paying taxes.
Generally, the Internal Revenue Service (IRS) classifies self-employed workers if:
It’s not very precise, but you can see that it buckets together self-employed, freelancers and independent contractors.
Depending on the nature of your business and its goals (i.e., hiring staff or getting business loans), you may want to register your business with the IRS for tax purposes. This is not always necessary for freelance workers, but it can be helpful to separate your business from your personal assets.
Contact a lawyer, an accountant or the local Small Business Administration (SBA) to know what’s best for your business needs.
Filing taxes as a freelancer or a self-employed worker is your responsibility. The IRS checklist is a good place to start, but you’ll also need to research your local and state requirements.
Most business owners pay taxes on a quarterly basis, estimating the amount they will owe throughout the year. You can use the IRS form 1040-ES to estimate tax payments.
If you’ve registered your business, you’ll need to address business taxes on the federal, state and local levels. This includes income tax, self-employment tax (a social security and Medicare tax), and employment taxes if you have employees.
Plenty of income tax calculator tools are available to help you plan what you’ll owe for the year. The amount you pay depends on your age, gender and marital status – all things on your freelance income tax form when you file.
As for freelance tax deductions, there are plenty of those. This includes obvious things like your office space, office supplies and travel expenses. But don’t forget to include things like advertising and marketing services, health insurance premiums and professional development courses.
Freelance vs. self-employed. Either way, you’re busy juggling work to keep your business going.
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