Freelancer Definition #web #developer #freelancer


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Freelancer

BREAKING DOWN ‘Freelancer’

A freelancer tends to work in the creative, skilled or service sector such as in: film, art, design, editing, copywriting, proofreading, media, marketing, music, acting, journalism, video editing and production, illustration, tourism, consulting, web site development, computer programming, event planning, photography, language translation, tutoring, catering, and many more. An example of a freelancer would be an independent journalist who reports on stories “at large” and then sells his or her story to the highest bidder. Another example is a web designer or app developer who does one-time work for a client and then moves on to another client.

The Internal Revenue Service (IRS) categorizes freelancers as self-employed. A self-employed worker, unlike an employee of a company, does not have his taxes withheld by the company s/he is doing business with. Paying income taxes is therefore, the sole responsibility of a freelancer. In addition to the income tax, a freelancer is also subjected to the self-employment tax mandated by the IRS. The self-employment tax applies to a freelancer who earned $400 or more in any given tax year. The self-employment tax has two components, namely Social Security and Medicare tax.

Since the IRS considers freelancers to be business owners, freelancers have to pay self-employment tax as both an employer and employee. For example, Social Security tax is assessed at a rate of 6.2% for an employer and 6.2% for the employee. An independent worker such as a freelancer would be taxed 6.2% + 6.2% = 12.4%, as s/he is considered to be both an employer and an employee. The Social Security tax is only applied to the first $127,200 income earned. The Medicare tax rate, which is 1.45% for both entities, is 2.9% for the self-employed worker. Total self-employment rate that a freelancer has to pay is therefore, 12.4% + 2.9% = 15.3% (as of 2017).

Freelancers may qualify for certain tax deductions that business owners can claim on their business expenses. According to the IRS, these expenses have to be ordinary and necessary for the operation of the business. This means that a freelancer would not be able to claim a deduction on an expense that s/he would normally make without the business. Some examples of deductions that can be claimed include home office deductions such as rent and utilities, costs of traveling to a job, costs of entertaining a client, costs of courses or certifications that directly relate to the business profession, etc.

In the U.S. freelancers do not receive W-2 forms for income tax purposes and instead will file a 1099 Misc. tax form which does not typically include any tax withholdings. A freelancer who provided services to multiple clients during a given tax year, will receive 1099 Misc forms from each of those clients.

Benefits of freelancing include freedom to work from home, flexibility of work schedule and a better work/life balance. Freelance work can benefit workers who have been laid off, reducing the incidence of overall unemployment in an economy.

Drawbacks include uncertainty about future income, job stability and consistency with getting new work. There is also a lack of typical employer benefits such as insurance and retirement plans, and typically lower per-hour rates compared to employed salary earners.


Free invoice template – SJD Accountancy #accountancy,limited #company,contractor #accountants,contractor #limited #company,accountants,freelancer #accountants,consultants,london,tax,inland


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FREE Invoice Template

Whether you are a multinational limited company or a single person sole trader it is important that you have a structured approach to your invoicing or you may lose track of what payments you are waiting for.

Invoicing your clients is a fairly straightforward and simple process, provided you have a good invoice template to work from.

You should keep a record of all the invoices you have sent out along with when you received payment in order to keep track of your finances.

Please use the below template which is based on a VAT rate of 20%:

Invoice Template

Please use the below template which is based on a VAT rate of 17.5%:

Invoice Template

If you are thinking of buying one of the many online accounting software packages, we’d advise you to read this report first.

If you do choose to set up a limited company. which is exactly what our other 15,000 contractor and freelancer clients have done, you may like to chose SJD to help form your company. Last year alone, more than 3,000 contractors formed their Limited company on our website.

SJD Accountancy

SJD Accountancy are the UK’s largest specialist provider of fixed fee, Limited company accountancy services to contractors; we’ve been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies – ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

  • Unlimited face to face meetings. This is a unique service only SJD Accountancy offers – unlimited face to face meetings across the UK – tax is complicated and sometimes only a meeting will do.
  • UK’s Largest contractor accountants with more qualified staff. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant face to face.
  • Money back service guarantee . All your telephone calls and emails will be answered the same day or we will make a full refund of that months fee.
  • Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market, including: Best Acc ount ant for Contractors, Accountant of the Year and Best Professional Service Team to name just a few.
  • All inclusive low cost fixed fee accountancy package which includes completion of accounts*, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, your own dedicated accountant* and all company returns for a fixed fee starting from £120 plus VAT per month. Check our packages for more detail.

Form your own Limited company with SJD – our same day online company formation service includes company bank account set up, VAT/PAYE registration and advice on optimum share structure.

You may also find the following pages, guides and case studies useful:

  • Take home pay calculator – How much could you be taking home
  • Contractor FAQ – All your frequently asked questions and their answers
  • First time Contracting or Freelancing? – A summary of the alternatives along with pros and cons
  • Choosing a contractor accountant – The factors to consider when choosing an accountant
  • Step-by-step Guide to Contracting – Download a FREE copy of our guide
  • Limited or Umbrella? Can’t decide? – We help you decide which is best for you
  • Guide to Contracting – All the best guides to contracting in one place
  • Expenses Guide – Know exactly what you can claim
  • Umbrella company guide – Everything you ever wanted to know about umbrella company services
  • IR35 Guide – A great plain English guide to IR35

*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.