The American workplace has changed a lot in the last ten years.More workers than ever are working from home. And itu2019s not just people who run their own business. Many companies are utilizing remote workers or freelancersItu2019s an arrangement that works for just about everyone. Employers donu2019t pay for office space or benefits packages for independent contractors, and workers get the freedom to set their own schedule.But there is one downside: taxes.If youu2019re one of the 10.6 million Americans working from home, you probably have to file your taxes as a 1099 employee.Most employers withhold federal and state taxes from in-house employeesu2024 paychecks. But if you work as a short-term employee or freelancer, youu2019re responsible for those taxes yourself.That might sound like a chore, but donu2019t worry. In this article, weu2019re going to look at everything you need to know about your 1099 taxes.Who is a 1099 Employee?1099 is a class of forms the IRS uses to keep track of certain types of income.Income earned through interest or dividends are declared through a 1099-INT or 1099-DIV form. Any money withdrawn from a retirement fund is also 1099 income.If you donu2019t earn your income through a regular position, the IRS considers you an independent contractor.This includes freelancers, short-term workers, self-employed individuals, and other positions on a case-by-case basis. For example, some schools consider substitute teachers to be independent contractors.If you make a living as an independent contractor, you will need to fill out a 1099 miscform.Get Disciplined With Your SavingWhen you work at a u201cnormalu201d job, your payroll department deducts your taxes before you even get your paycheck. At the end of the year, you get a W-2 detailing all of the taxes youu2019ve paid to federal and state taxes, social security, and more.If youu2019re transitioning from a conventional employee to a 1099 employee, you might be excited to see all of that money still included in your check.But, you still need to pay those taxes.Many freelancers donu2019t do anything about that until it comes time to file their taxes. Then, they pay all of their yearly taxes in one lump sum.You might be able to do that, but itu2019s not very fun.Instead, make it a habit to set aside a percentage of your earnings until tax time.The exact percentage might vary, but itu2019s a good idea to save 30% of each check.Turn to the ProfessionalsWorking as a W-2 employee, you generally wonu2019t have a difficult time filing your taxes on your own. There are plenty of free tax preparing services that make it easy to file without seeing an accountant.However, as a 1099 employee, your situation is a little more complicated.If you try to file on your own, you may miss important deductions that cost you more money than you need to pay.Tax professionals know the tax code inside and out. And while their services arenu2019t free, itu2019s worth it to have their expertise on your side.Going to a professional will keep you from paying more than you need to. But it can also prevent you from overlooking tax debts, which can land you with penalties down the line.Build Your Own Benefits PackageMost companies offer benefits packages for full-time employees. These packages often include healthcare, life insurance, and retirement packages.But as a 1099 employee, youu2019re on your own. However, this gives you the freedom to find plans that work better for your situation.As a salaried employee, youu2019re stuck with whatever retirement accounts or healthcare plans your employer chooses to provide for their employees.Your employer might contribute to your insurance or retirement plans, but you might be able to find a better deal on your own.If youu2019re in good health you might be paying more than you need to for insurance. Or it could go the other way as well: you might have chronic health problems that the provided insurance wonu2019t cover.As an independent contractor, youu2019ll have the freedom to build the benefits package that you really want.You Can Ask for a RaiseIn 2024. the number of companies using freelance workers rose by 26%. Itu2019s not just startups or small companies who canu2019t afford to hire full-time designers or bloggers though.Even large companies are turning to freelance workers for short-term projects.There are a number of reasons for that increase. Companies need highly-skilled workers, and those workers want freedom. Freelancers typically are skilled enough to demand that freedom from their employers.But it works out for the companies as well. Using freelancers usually saves money.Freelancers usually donu2019t work in the office, so companies spend less on office space and furniture. They donu2019t receive benefits packages.And because they only work on a per-project basis, companies arenu2019t paying them during downtime. But because hiring a 1099 employee saves money, that gives you room to negotiate.Look into what it costs the company to hire a full-time employee. Donu2019t forget to include costs beyond salary and benefits.Compare this to the offer from the company. If thereu2019s any room between what theyu2019re paying you and what a full-time employee would cost them, take advantage.Use that to negotiate for higher pay. As long as youu2019re still saving them money, they might take you up on it.Go Forth and FreelanceThere are many challenges to being a 1099 employee, but now that you know what youu2019re dealing with, it should be a cakewalk.If you can handle the responsibility that comes with it, being an independent contractor can offer you a freedom that beats any u201cnormalu201d job.
