The world’s technological advances in the last decade have made it easier for professionals to build a career online. Developments in social networking, as well as tools for remote collaboration and task management, are creating the perfect environment for freelancers working as 1099 contractors.
Working independently comes with great benefits for both your personal and professional life, which makes it the best option for many people. Do you want to know how working as a 1099 employee benefits you?
Let’s start with the basics.
A “1099 employee”, or independent contractor is a person who offers services to different clients. Their services are independent of the company so they only get paid for the work they perform but do not have some benefits and deductions that W-2 employees (salaried workers) would receive from an employer.
Their clients have a low degree of control so they have autonomy over their way of working and take care of all their business expenses. Some of the most common types of 1099 jobs are:
There are, however, some big advantages of being a freelancer like claiming 1099 deductions.
So, what are all the benefits of working as an independent contractor?
Both your personal and professional life will be impacted when you decide to work independently. Here is a breakdown of the benefits of sole proprietorship or being a freleancer.
Independent contractors have more control over their workload and time, which translates to an improved personal life. This is how your personal life will improve:
Being a 1099 worker, you are your own boss, and this gives you greater flexibility with your time. Because you have complete control of your own schedule, you can decide when to work and how many hours you can put in a week.
Of course, your clients need to be taken care of, so you need to be available for meetings and meet deadlines for finishing certain tasks. But you can still arrange your schedule with a lot more freedom than W-2 employees.
Being in control of your schedule will also allow you to invest more time in your well-being. Whether you need time for exercising, being there for your kids when they come home from school, or going out for lunch with your friends. You can always find a way to work around your daily activities.
Having time for yourself can be very beneficial for both your mental and physical health, which in turn will also increase your productivity and creativity when working.
While some companies give independent contractors and freelancers an office space to work from, many of them go for other options. No more losing hours every day stuck in traffic trying to get to the office, you choose where your office will be.
Whether you choose to go to a cafe, work from home, or even find a co-working space where you can meet other freelancers and entrepreneurs. Having this location flexibility will make your workload less stressful, and help your personal development.
Being able to choose when and where you work, also gives you the great opportunity of traveling around the world, without worrying about losing your clients or income. Especially for younger generations, this is a number one reason for becoming an independent contractor.
The most common ambition among millennials is to see the world as well as positively impacting their communities. The 1099 lifestyle certainly allows you to do it. On the other hand, if you are more stable or have other responsibilities that don’t allow you to travel the world, you can still benefit from being an independent worker.
Although you won’t get paid vacations, it will be a lot easier for you to plan holidays and take time off when you need it. Don’t forget to give your clients a heads up before you take vacations, and plan ahead to avoid dropping the ball on important tasks and losing clients.
Independent contractors have to learn many things on your own and find solutions to a variety of problems, possibly in more than one field. That can bring many benefits to your professional life. Here are the main advantages:
As an independent contractor, there will be no employer withholding taxes. This doesn’t mean there are no taxes involved, but you will be paying them differently, and you can use this to your advantage. Being self-employed, you can avoid paying 1099 taxes, but you should still contact a tax professional to help you examine your deductions and avoid audits by the IRS.
You can deposit higher than regular amounts on your retirement accounts, and manage your own social security, healthcare, and income taxes. Another benefit is that you can deduct business expenses like home office supplies, internet travel expenses, or even meals.
You can also check out our tax deduction tracker. It is a tool built specifically for self-employed workers to help identify deductible expenses and estimate quarterly taxes.
See for yourself why freelancers love our tax software.
You will have the freedom to select among multiple employers and assignments that meet your wants and needs. 1099 workers are not tied to one company and this gives you a great advantage, especially when starting with a new client.
Because you do not have a long-term commitment, testing out a new client will be easier, as well as refusing those you think might be unsuitable for you. If you don’t like a company or you feel that the pay is not enough for you, just wait for the independent contractor agreement template to be over and move on.
Another benefit is that you will be able to negotiate your own rates and terms with your clients. And having no limitations on the hours you work, means that you can decide how much your monthly income will be.
Independent contractors and freelancers on average can earn 40% more than w2 employees in the same business position. This is because companies do not have to pay Social Security taxes or provide unemployment benefits. This allows freelancers to set higher rates and still get hired. There are some situations where you'll receive a 1099 along with your W-2 in the same year.
You may want to specialize in a field, attend classes or seminars to gain additional skills, or take on more assignments that will help you grow professionally. Instead of having to wait for your boss to approve a training course or applying for a new position, you decide what you want to pursue.
Also, if there is a particular industry you want to explore and learn, you can test it out without committing to a full-time job. There are no limits as to what kind of job you can do, as long as you invest the time to learn it.
Working as a freelancer means you won’t have a superior to assist you. It will be totally up to you to complete the job properly and on time. This may sound scary at first, but it will help you develop the skills you need much faster.
As you move around different jobs, you will be learning to use new tools, meet new people, and work on new projects that will challenge you to find better solutions. All this adds up to a greater experience to build up your resume and be a more desirable contractor for the next client.
The number of self-employed people or independent contractors has been rapidly increasing every year. Companies that do not consider offering benefits to 1099 workers are missing out on a wide variety of skilled professionals. For this reason, many employers have started to offer certain benefits to build a strong team of contractors. Be sure to make sure you are an employee misclassified as a freelancer.
These are some of the benefits that you could ask about when negotiating a new contract::
Some companies offer this benefit as an incentive to keep skilled contractors working for them by helping them develop professional skills and provide more growth opportunities.
These educational resources are not for you to learn how to perform your current job, but they can be valuable assets to bring to other projects.
Another option available for employers is to provide travel and equipment discounts. You will enjoy reduced expenses and your work will be performed more efficiently. This can be used in a rate negotiation as it represents a benefit for your client as well.
Companies can offer you access to their group’s health insurance plans or give you the option to buy one. Finding health coverage is more difficult for 1099 workers and some insurance companies do allow businesses to extend health benefits to independent contractors.
As you can see, being a 1099 employee comes with a lot of responsibilities and self-discipline, but the benefits it will bring you are definitely worth the hard work.
Are you having trouble navigating 1099 forms? Check out this breakdown of all 21 1099 types, and you’ll understand their intended purpose and use in no time.
How do you send W-2 forms as an employer? How do you protect sensitive information when delivering W-2s? Find out right here.
It’s tough to figure out how much money to set aside as a 1099 contractor, especially with quarterly payments in play. Use this article to figure out how much you have to pay.
