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This article is posted with permission from our partner Lili. Get the digital bank account designed for freelancers with Lili and manage your business expenses, estimate your taxes, and save for a rainy day all with zero account fees. Start a Lili account today. As inflation rises in the United States, a financial blind spot known as the money illusion is becoming increasingly important. Put simply, people tend to think in nominal dollars — the actual amount of money spent or earned — and not real dollars, which is the purchasing power of your money after taking inflation into account. For freelancers and gig workers, the money illusion can flip profits into losses. A simple rule of thumb makes it easy to understand the powerful effects of inflation over time. Take 72 and divide it by the annual inflation rate, which is currently 4%. The resulting number tells you how many years it takes to cut your purchasing power in half. For instance, given the current inflation rate, in 18 years (72/4) your current revenues will only be worth half as much. To see if you’re at risk from the money illusion, try to answer the following question developed by Eldar Shafir, Peter Diamond, and Amos Tversky. The question goes like this: Adam, Ben and Carl each received an inheritance of $200,000 and bought a house. Each of them sold the house a year after buying it. Economic conditions were different in each case.
Who got the best deal? Who got the worst deal? According to the research, the most popular answer is that Carl got the best deal and Adam did the worst. Carl, after all, got highest sales price in nominal dollars. However, in real dollars, these answers are backwards. Carl did the worst — he lost 2% of his money to inflation — and Adam did the best. In fact, Adam was the only one who made a profit in real dollars. If, like most people, you thought Carl got the best deal, you should be especially careful when making long-term financial decisions right now. Let’s review the specific ways the money illusion can impact freelancers. Given rising inflation, it’s important for freelancers to think about how to increase their revenues to keep pace. Consider a therapist with many long-term clients. Therapists are often hesitant to raise prices on these clients due to status quo bias, which is our preference to keep things as they are. Unfortunately, in a period of rising inflation, that can create a growing disconnect between what they charge clients and the revenue they need to maintain their lifestyle. If the therapist is feeling the pinch of rising prices, they should raise their own prices to keep pace, even on their long-term clients. This will help them avoid a much larger price increase in the future, which could feel unfair to clients. Of course, inflation is not the only factor determining price increases for freelancers. A designer who just won a major award for a campaign she designed for Apple shouldn’t limit her price increases to the inflation rate. Rather, she should consider supply and demand more generally. Consider a roofer working on a new roof: If they’d made a bid on a project in March 2020, the cost of lumber was around $785 for 1000 board feet. However, if the project took a few months to get started, those same 1000 feet would cost nearly $1700, or more than twice as much! If the roofer failed to insert a clause for material price increases in his bid, he might end up losing money on the job. In periods of high price uncertainty, it’s important to protect yourself from rising prices in case of project delays. Imagine an entrepreneur running a pop-up restaurant or cloud kitchen. The owner was responsible enough to get insurance, but failed to increase her coverage to keep pace with inflation. As a result, when a pick-up worker slipped on a wet floor and broke his leg, the medical coverage was no longer sufficient. It was only able to cover half of the hospital bills, forcing the entrepreneur to take out expensive loans to cover the rest. Given rising prices, business owners should review their insurance coverage on an annual basis. Different freelancers are impacted differently by inflation. The roofer experienced surging lumber prices in the summer — prices for wood have since come down — but drivers are dealing with much higher gas prices in the fall and winter. Given these disparities, it’s important for freelancers to consider their own inflation risk. They should look at pricing trends for their largest expenses, whether it’s lumber, gas, or cleaning supplies. Based on this personalized approach to inflation, they should then develop a strategy for dealing with these increased costs. In the U.S., we don’t see inflation, at least in our daily lives, which makes it easy to ignore. But if you fail to account for inflation in your business, you’re much more likely to feel its impact. Given their limited safety net, freelancers are especially vulnerable to the money illusion, which is why you should take steps to deal with inflation before it’s too late. via Freelancers Union Blog https://blog.freelancersunion.org/2021/10/27/what-freelancers-need-to-know-about-inflation/
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A fairer tax system for all is the intended objective of new tax reporting requirements for financial institutions, according to government agencies such as the IRS and the U.S. Department of the Treasury (USDT). In theory, implementing new compliance regulations will better track the income and tax reporting of wealthy Americans. According to the USDT, a recent study found that the wealthiest 1% failed to report 20% of their income and failed to pay nearly $175 billion in taxes owed annually. Obviously, this is not fair to other taxpayers, and it also represents a huge loss in revenue for the government that could be used to support programs that benefit everyone. However, one of the key strategies to address this that the government is proposing in the American Families Plan Act could put some self-employed individuals’ financial transactions under increased IRS scrutiny. This is because in order to close the gap that noncompliance in the tax system creates and provide more comprehensive and timely services to all taxpayers, the IRS needs additional financial resources. The USDT reports that the IRS budget has been cut by 20%, and the number of complex revenue agents dedicated to high-end evasion and large corporate cases has also decreased by 35%. This has resulted in IRS audits falling across the board, and particularly for the top 1% of income earners. To combat this problem, new tax compliance proposals include a caveat that banks must increase their reporting on the inflows and outflows of cash through the accounts of their customers, which means if there are discrepancies in these amounts and your reported income, you may receive a letter from the IRS for more information or even be subject to an audit. In the proposed guidance, freelancers may be under increased scrutiny, because the tax administration reforms will: · Increase its monitoring of bank accounts, flagging those individuals with high inflow/outflow activity and discrepancies in those amounts and your reported income. This makes it more important than ever to track and report your income and any pass-through expenses accurately. · Provide more advanced technology to improve enforcement efforts and facilitate the IRS hiring and training more auditors to focus on complex investigations of large corporations, partnerships, and global high-wealth individuals. · The president’s proposal directs that additional resources go toward enforcement against those with the highest incomes, so if your actual income is significantly more than the average taxpayer ($400,000 is the threshold), you will likely be subject to additional scrutiny based on the bank reporting requirements outlined below. How the new bank reporting requirements may affect freelancersThe new proposals to support tax compliance also strive to provide the IRS with more complete information from third parties such as banks, to make sure that income is accurately reported and taxes are fully paid. However, according to the rationale given by the USDT, “high-income taxpayers disproportionately accrue income in opaque sources—like partnership and proprietorship income—where the IRS struggles to verify tax filings. As a result, up to 55% of taxes owed on these less visible income streams is unpaid, with disproportionate levels of noncompliance for those at the top of the income distribution.” The USDT claims that the tax compliance reform plan will provide the IRS with information on account flow “so that it has a lens into investment and business activity—similar to the information provided on income streams such as wage, pension, and unemployment income.” The government will be requiring that banks add to their regular, annual reports information about aggregate account outflows and inflows of accounts. The objective is to give the IRS information to help improve its audit selection so it can better target its enforcement activity on the most suspect tax evaders. The bottom line for high-income freelancers and self-employed business ownersFor the average, law-abiding freelance and self-employed individual, these proposals should not have any impact at all. However, if you have very complex business dealings or you earn over $400,000 per year, you must be cognizant that you may be under increased scrutiny and have a higher likelihood of an audit. It is imperative that you track all income and expenses and make sure that you have complete transparency when it comes to any business activities you are involved in so you can easily provide information should the IRS or another government entity require you to provide it. Jonathan Medows is a New York City-based CPA who specializes in taxes and business issues for freelancers and self-employed individuals across the country. He provides tax, accounting and business articles for freelancers on his website, http://www.cpaforfreelancers.com, which also features a free newsletter, blog and a comprehensive freelance tax guide. via Freelancers Union Blog https://blog.freelancersunion.org/2021/10/26/a-proposed-tax-compliance-law-for-the-wealthy-could-affect-freelancers/
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This article is posted with permission from our partner Lili. Get the digital bank account designed for freelancers with Lili and manage your business expenses, estimate your taxes, and save for a rainy day all with zero account fees. Start a Lili account today. With the social media landscape evolving every second of the day, it can seem grueling trying to stay on top of trends and truly nail down an understanding of the current state of the social media market. But here are a few simple things you MUST start with. First things first, in order for your social media presence to gain traction and appeal to your targeted demographic you must find your niche audience. We’ve all heard the ‘find your niche audience’ phrase, but why does it matter? Finding your niche doesn’t only give you prospective clients, it builds a community of people that have something in common: your channel. Once your audience finds you, you will notice organic engagement on your posts, folks communicating with each other in the comments section, sharing your posts for their friends – and at the end of day, isn’t having a strong community what it’s all about? So how does one achieve this? It may sound cheesy, but all it really boils down to is good old-fashioned research. Start by putting together a word cloud of what your freelance business is trying to accomplish with words that appeal to your targeted demographic. For example, if I was breaking out into the world with a freelance dog training business, I would list words like: dog training, puppy training, dog lover, dog sitter, behavior modification, etc. Once you start to get a list of about 10 words or phrases, you start to get into the nitty-gritty of creating what is called the ‘hashtag ladder’ for your Instagram posts. So where and how do you find your hashtags? From your word cloud you made before! Start breaking up the phrases into single words to find the tags more easily, and then add emojis or a second word to start really digging into what’s trending. Another crucial way to make sure you’re reaching your niche and targeted audience is by including your city initials in the tags or any relevant holidays being celebrated on that day. If you’re feeling lost on how to find out what hashtags are popular on Instagram, Twitter is also a great place to do research as well. Simply type one hashtag in at a time to see how relevant it could be. If you’re seeing posts from a couple of years ago as the most recent, then change up the phrasing a bit or add an emoji when applicable, etc. Do your research! It will be extremely useful when building your hashtag ladder. A Hashtag Ladder strategy is “a theory is that by having a set of 30 hashtags, ranging from easy to difficult to rank for, you can start to hit the popular results for the easy ones, gain some engagement, rank for more difficult ones, grab more engagement and so on up the ladder”. This strategy was coined in the earlier stages of Instagram where folks were stacking 30 hashtags in every post but in order to start off with your posts feeling less ‘spammy’, we like to stick with just 10 hashtags that are catered to each individual post you post to your Instagram account. You want to start out with at least two hashtags that have been used at least 1m times, three that are in the range of 50,000 – 100,000, the next three to be within the 10,000 range, and the last two will be your business’ very unique and personal hashtags. For example, if my dog training business was in NYC and the name of it was Pup Lovers Training, my personal and unique hashtag would be #puploverstrainingnyc or, even more personal, #wearepuploverstraining. For hashtags that are at the lower end of use, you have a great chance of your post hitting the top of that hashtag page. Check out what you consider your competitors and see how you could do things differently and more uniquely. Ok so now you have 10 hashtags that you love but you’re realizing the content your posting today won’t totally match the content you’re posting tomorrow, so what to do? Keep a hashtag bank of about 30 – 40 hashtags that you can switch out when necessary. Instead of doing the individual research every single day, have it as a biweekly or monthly task to switch out underperforming tags with higher-performing ones. It’s important to maintain the ‘ladder’ categorization since this will help you stay organized and use your time efficiently. Once you feel confident in your ladder strategy, you’ll need to find the language and tone of your channel. Think of this like a social brand guidelines for yourself – that way you don’t get overwhelmed and confused when it comes to caption writing or comment responding. Your channel’s voice will be set and this will ultimately help you across all the other social platforms immensely. Questions to ask yourself when finding your brands voice:
These answers will help you understand exactly what kind of messaging you want perceived and will inform the tone of voice you’d like for your channel. Do you want your channel to be playful, charming, edgy, confident? A playful tone would be something along the lines of “Having trouble with your devil, I mean cat, that you just adopted? We take on all kitties with zero upfront exorcism fees ??” vs. a confident/edgy tone of voice, “It’s no secret cats are demons, it’s our secret how we make them into angels ?” Tailor your voice to match your audience in a unique way that feels informed but also stands out. I find that remaining as close to your own personal values increases the authenticity of your platform creating an open and welcoming vibe. Now that your hashtag ladder and channel voice is finished and neatly tied with a bow, you can start creating content and posting it! But that’s for another blog. ? via Freelancers Union Blog https://blog.freelancersunion.org/2021/10/20/developing-a-social-media-strategy-for-your-freelance-business/
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As a freelancer, applying for a full-time position might feel like squeezing a varied body of experiences into small, neat boxes. After all, many of these job application processes are designed for applicants with a history of full-time positions: a reasonable pacing to career growth, title changes every two to three years, established company names. Compare that to a freelancer who is self-employed, changing titles per job, and juggling various clients. How might this freelancer list her most recent positions? I encountered this struggle while trying to tailor my freelance experience in commercial production to the expectations of event coordination positions. While I was sure that the bulk of my actual work aligned well with the responsibilities of these jobs — anyone in film can tell you that production involves project management and event coordination — I wasn’t sure how to portray my application in the right light. I just needed to get to the interview process, I thought, and then I could talk through some of the nuances that made me stand out among other applicants with a history of full-time positions. While this ultimately proved true, I also found that I needed to approach my application process in an entirely new light—one that framed my experience in a way that was easy to grasp for those unfamiliar with freelance work, and one that celebrated my strengths as a freelancer, too. Rework your resume, rework your vocabularyIt’s no secret that getting past the first wall of the hiring process often involves tweaking your resume to better match the job description. How does that apply in the case of the freelancer? Oftentimes, the specifics of roles can change between gigs, though functions of these roles remain similar in terms of one “title.” And, working on a per-project basis, you might have many projects under one title within a six-month basis. How can we better frame this type of work for a job description that asks for “two to three years of relevant experience”? Consider placing a rough range of dates on when you’ve booked work under one title — say, January from two years ago through now — and describing the title’s responsibilities. Then, where most might place the name of the company or organization, consider placing a label that best describes your situation. Some options include “Freelance position, clients include x, y, z,” and so on. In this manner, instead of listing 50+ projects, you’re putting all similar experiences of one step of your freelance career into one bucket that hiring managers can identify. Along the same lines, some hiring managers might not understand the vocabulary used in freelance settings. When I applied for Event Coordinator positions as someone who had primarily produced low-budget projects, I found that all my responsibilities matched those of the job description. But would the word “Line Producer” or “Producer” resonate with those unfamiliar with film and commercials? I decided to brand my experiences as “Production Coordinator” and help my potential employer see the relevancies in my work history. Make sure you do your homework and understand the titles relevant to the position you’re applying to. Single out a success storyWhile a job posting for a full-time position might not encourage you to list out the thirty projects you worked on in the past half year, these projects can still come in handy in the interview. That said, try to single out one or two success stories that encapsulate the main shape of your freelance work. And, as a freelancer, you’re more likely to have unique, varied experiences. These can help you stick in the minds of interviewers as someone who is qualified and ready for a challenge. “Sometimes we don’t always have as much support as we need during events,” my interviewer had asked me regarding my current job position. “Tell us about a time when you both coordinated an event and filled in those little gaps to make sure everything ran smoothly.” I could have mentioned random projects, projects that went off without a hitch, but I chose to speak on a commercial shoot in which we built a spaceship and simulated zero gravity. I think this brought home the point that I was up to any task while also leaving them with a memorable scenario. Highlight your strengths as a freelancerUltimately, as a freelancer, though you may need to form-fit your experience into the neat boxes of full-time job application processes, you can’t hide the nature of your work. Own it! At the end of the day, freelancing helps you develop many strengths that other employees may not have. You have hustle; you have drive; you know how to work your expertise and be your own business manager! I imagine you’ve adapted to working with different teams in a heartbeat and that you’ve learned how to work under different leadership styles. Make this clear! This process is about highlighting the strengths of your freelance career while also making it utterly transparent that you’re ready for the full-time position that aligns with your skill set. via Freelancers Union Blog https://blog.freelancersunion.org/2021/10/19/how-to-apply-to-full-time-jobs-with-a-freelance-resume/
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This article is posted with permission from our partner TaxAct. File your freelance taxes with confidence using TaxAct’s easy-to-use tax software. Freelancers Union members get 25% off the cost of federal and state tax filing. Freelancing is incredibly rewarding, but it does come with its own set of financial challenges. Unlike a typical 9-5 job, you are responsible for billing and tracking all of your own income. And that tends to be rather irregular. You are also in charge of setting your own rates, finding your own work, tracking your expenses, and reaching your business income goals as one person. While the financial side of freelancing can be overwhelming, anyone can be a successful freelancer if they take the time to map out an income plan. Whether you are a new freelancer or have been freelancing for years, these tips can help you better organize your finances, and in return, provide the potential to earn even more money. Plan Your ServicesThe first step in creating an income plan is to figure out the money-earning services you will offer. To do this, you need to decide what your niche is within your profession. For instance, freelance photographers need to determine what type of photography they would like to offer. Writers need to decide the type of writing they want to focus on and what clients they are interested in working for. Make a list of all of the services you plan to offer. Add notes to each service to describe the process, such as how much time you estimate it will take, any potential expenses that may occur, and how you plan to market yourself. Determine Your Annual Income GoalSetting an income goal is the key to financial success for freelancers. With a goal, you can then work to price your services accordingly. First, decide what you would like your annual income to be. Then divide that number by 12 to calculate your monthly income goal. Keep in mind that your income will fluctuate as a freelancer, so even if you fall short on your income goal some months, you have the opportunity to make it up in other months. When goal setting, it is good to push yourself. Set high but realistic goals. Write all of them down, and keep them in a visible place to motivate yourself. Calculate Your Pricing and WorkloadAfter deciding your annual income goal, you need to calculate your pricing and workload. Take this example: Say you want to earn $60,000 annually from freelancing. That means you need to earn around $5,000 every month. If you are a freelance writer and only charge $50 per 1,000 words, you have to write 100 articles every month to earn your goal of $5,000. That is 25 articles a week, which is not very attainable or desirable. You could offer the same writing services for $250 each. Then you only have to write 20 articles a month, or around five a week to meet your goal. Pricing and workload go hand in hand. You do not want to shortchange yourself as a freelancer and end up making less than minimum wage when you calculate your hourly rate. Further, do not forget to factor overhead expenses into your prices. As a business owner, you will spend some time performing tasks that are necessary for your business but don’t make you any money. That’s why it is important to charge clients fairly for time you spend on overhead costs, such as accounting, responding to emails, and marketing. Open a Separate Business AccountThe easiest way to keep your freelance finances organized is to open a separate business account. It is nearly impossible to cleanly sort out your business expenses and income when it's combined with your personal income and expenses. By opening a separate business savings and checking account, you can ensure your accounting practices are neat, organized, and efficient. Pick an Accounting SystemHaving a proper accounting system will not only save you time, but it will keep your finances organized too. Organized finances help to assure you aren’t missing any payments, do not have unpaid invoices or aren’t paying too little in taxes. You might consider an accounting system such as FreshBooks. FreshBooks also allows you to send and receive invoices, so you can handle all of your business finances in one place. Keep Track of Business ExpensesMany business expenses can be used as a tax write-off, so you should track them diligently. Of course, you should also track your business expenses to ensure you aren’t spending too much while earning too little. Don’t Forget to Save for TaxesSince freelancers do not have taxes taken out of their paycheck automatically, they are required to pay the IRS quarterly estimated taxes. Don’t put yourself at risk and save too little for quarterly taxes. Avoid a financial nightmare by making sure to save 20-30% of your earnings to cover your tax liability. If you want to be conservative, you can always save more. Create an Emergency FundEveryone should have an emergency fund for personal peace of mind. An emergency fund is especially vital for freelancers. As a freelancer, your income is neither steady nor guaranteed. It is likely to fluctuate. Though you are sure to earn a higher income some months, there are certainly months where your income will take a notable dip. Be prepared for the worst by setting up a business emergency fund. By setting up a business emergency fund, you can protect your business in the event that your income drops significantly, all while safeguarding your personal finances. Income Plans are All the RageCreating an income plan takes some time, but it keeps you on the right track with your business. An income plan ensures you make enough money for the amount of time you spend on your business, allowing you to be as successful as possible. via Freelancers Union Blog https://blog.freelancersunion.org/2021/10/18/how-to-make-an-income-plan-as-a-freelancer/
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This post was provided by Dinghy. Freelancers Union partners with Dinghy and NSM Insurance Group to help freelance writers say hello to peace of mind with liability insurance crafted exclusively to meet their needs. Get a free quote in minutes here. Any day now, they are going to realize that I’m just not that skilled. I don’t deserve to be writing for this client and it’s all going to go catastrophically wrong. I couldn’t possibly raise my rates, because my copy isn’t good enough. I’m not capable. If your train of thought at work goes something like this, you might be suffering from imposter syndrome. Imposter syndrome is the name given to feelings of inadequacy, anxiety, and fear of failure in people who are outwardly successful and talented. It can make you feel like a fraud in your job as a writer, as if you’re playing a role undercover and could be found out at any minute. It’s not a nice feeling and one that can start to affect your work and mental health if it gets out of control. Here’s what to do if you start to hear that little nagging voice inside you that says you’re not good enough... How are freelance writers affected by imposter syndrome?If you’ve ever experienced imposter syndrome, you’re not alone. All writers can experience this feeling, from new writers to published authors, as most people will experience it at some point in their working life. A study reported in Time magazine estimated that it affects up to 70 percent of us. Freelance writers can be particularly vulnerable to imposter syndrome because it thrives when you are isolated from others, have to work solo and are under pressure to complete projects to perfection. If you are new to freelance writing, you may still be finding your feet, searching for clients and this may cause you to question if you are up to the job. On the other hand, if you are a published author, you may still live in fear that you are a ‘fraud,’ feeling that you were published out of luck rather than skill. Don’t try to ignore the feelingTrying to ignore the feelings of imposter syndrome when they arise might only make things worse, as you find yourself fighting your internal monologue all by yourself. One of the most powerful things you can do is to acknowledge the feelings and give a name to them (reading this article is an excellent first step!). Then, when the thoughts pop up, you can say, “Oh, hi, imposter syndrome,” and quickly counter them with some rational and positive oppositional thinking: “I’ve never failed at completing my task on time,” “This client has been happy with all my previous work,” “I do deserve to be here because I’ve worked hard.” Talking to others about your feelings can also help, whether that’s friends, family, or other writers. Chances are they’ve felt the same way at some stage. They will also be able to point to other examples of your earned successes or be able to give you some perspective on how work isn’t everything. Relish in your successesWhat do you do when you finish a project? Just move on to the next thing on your to-do list? This could unwittingly be feeding the imposter monster. Taking time to celebrate and enjoy your successes is an important part of job satisfaction. And when you’re a freelance writer, you don’t have a boss or manager there in the background to praise you when things go well or help you see what you’ve achieved in an annual review. You have to be that cheerleader for yourself. Make sure you’re shouting about your successes on your website and social media — whether that’s new contracts won, projects completed or featured in the press. Sometimes writing it down and publishing it can make it seem more real. Develop a ritual for jobs well done. This could be a treat like a coffee at your favorite cafe, finishing the day an hour earlier so you can go on a walk, or going out for a bite to eat with a fellow writer. If you live with other people, like roommates, partners, or children, try to involve them in your successes, too, and have them celebrate with you. Alternatively, you could join a freelance community, so you have like-minded people to share your big wins with. Fake it until you make itYou know those people who come across as so confident, charismatic, and self-assured? The people who always seem to be smiling and relaxed, no matter how much pressure they’re under? Don’t you wish you could be like them? Here’s a secret: You can! Here’s another secret: They don’t feel that confident all the time. They just got good at faking it until it became a reality for them. Smiling is key here. Smiling gives off the impression that you’re happy and not the bundle of nerves that you feel like inside. It wins people over. But most importantly, the act of smiling in itself has measurable, physiological effects on your body. It releases feel-good hormones like endorphins, dopamine, and serotonin, and neuropeptides, which reduce stress and slow your heart rate. Smiling tricks your body into making you feel more relaxed and confident. Over time, all this faking confidence becomes second nature, until you realize ... you’re not faking it anymore! You’ve become that person — the confident, in-control role model. Let go of perfectionPerfectionism is one of the most common traits of writers suffering from imposter syndrome. As a writer, you will naturally hold yourself to a high standard, making sure that your spelling and grammar is perfect, free of typos and that the message is clear and concise. Striving for perfection can leave us feeling overwhelmed, overworked, and still unsatisfied because no piece of work we did could ever meet our exacting requirements. One useful technique here is to try to step outside and externalize the problem: What would you say to a friend or another freelancer who was experiencing the same feelings and worries? This can help you take a more objective perspective and realize that it is just work — it’s not life or death. Indeed, one of the most inspirational figures and role models during the recent Olympic Games in Tokyo was Simone Biles. We know she is capable of some jaw-dropping, record-breaking gymnastic performances, but she stood out for her ability to say “no” — to choose to protect herself and her mental health against the weight of expectations. It’s a good lesson for any of us that ever feel pressure to perform consistently at a level of perfection. It’s not sustainable all the time. We’re only human, and sometimes we need to put our health and well-being first. Our clients — the good clients, the clients we want to keep working for — will understand. via Freelancers Union Blog https://blog.freelancersunion.org/2021/10/14/how-to-deal-with-imposter-syndrome-as-a-freelance-writer/
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The proposed $3.5 trillion legislation package called the “Build Back Better Act” is currently being debated and will likely be changed before any new tax laws go into effect, but it’s important for self-employed business owners and freelancers to keep an eye on it as there are some major tax changes in it, which my impact you. Here are some of the most relevant potential tax changes and how they could impact you and your business: If the bill passes, one of the most significant changes that would be effective immediately is an increase in the top capital gains rate – increasing from 20% to 25%. This applies to all sales on or after September 13, 2021. There are other changes effective after 2022: · The top C-corporation tax rate rises to 26.5% for taxable income over $5 million; 18% for the first 400,000 and 21% thereafter until the $5 million threshold. · The top individual tax rate increases to 39.6% for taxable income over $450k for married filing jointly (MFJ) and $400k for single filers. · The net investment income tax on trade/business income would be 3.8% this tax is charged on K-1 trade/business income if taxable income is over $500,000 for MFJ and $400,000 for single filers. · An additional 3% surtax on incomes over $5 million for MFJ and $2.5 million for single filers. · Back door Roth IRA contributions would be eliminated. This approach involves taking a traditional IRA or 401 (k) accounts and converting it to a Roth IRA. This is currently a legal way to get around the income limits that normally restrict high earners from contributing to Roth IRAs (contributions are eliminated for those in the top income tax bracket). · Perhaps growing your freelance business to is on your long-term goal list. If so, and you make it into the top income tax bracket, you would no longer be able to contribute to a retirement account if your retirement account balances are over $10M. Some other key objectives of the proposed Build Back Better Act include: · Expanding access to capital, particularly for businesses owned by women, minorities, and immigrants. · If you are a freelancer who focuses on government contracts, there are proposed changes included in the Act that will increase access to federal contracts and also provide new financing and technical assistance programs to help level the playing field in these areas. · There may be a cut in taxes for small business owners with children. The administration is looking to extend the Child Tax Credit included in The American Rescue Plan (ARP) increased the Child Tax Credit from $2,000 per child to $3,000 per child for children over age six and $3,600 for children under age six. Research from the Treasury Department estimates that more than 3 million small business owners with children will benefit from these tax cuts. · Freelancers and small business owners who buy health insurance through the HealthCare.gov exchanges may benefit from a continuation of the American Rescue Plan tax credits that lowered health insurance premiums for those buying coverage through the Affordable Care Act. · The proposed bill would also guarantee 12 weeks of paid parental, family, and personal illness/safe leave by year 10 of the program and ensure workers get three days of bereavement leave per year. The funds for wage replacement would be provided by the federal government, not the employer. Modifications to any proposed tax changes are likely to happen as part of negotiations to get the bill passed and signed into law. Watch for further information to become available in the next several weeks. We will keep freelancers informed as more details develop. Jonathan Medows is a New York City-based CPA who specializes in taxes and business issues for freelancers and self-employed individuals across the country. He provides tax, accounting and business articles for freelancers on his website, http://www.cpaforfreelancers.com, which also features a free newsletter, blog and a comprehensive freelance tax guide. via Freelancers Union Blog https://blog.freelancersunion.org/2021/10/13/how-the-build-back-better-act-could-affect-freelancers/
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Are you an experienced freelancer with wisdom to share? Would you like to get more involved with Freelancers Union? If so, we want you to be our next Member Representative on the Freelancers Union Board of Directors! Freelancers Union was created to serve the interests of independent workers, and member participation is critical to shaping the future of the organization. The Member Representative has the same responsibilities as our other Board Members in seeking the greatest success for Freelancers Union as an institution, and its ability to enact its mission. Member Representatives are elected by the Freelancers Union membership at large to serve a two-year term. They must be able to attend (either in person or by phone) 3 board meetings per year to discuss events, campaigns, and other issues related to the organization. They bring their experience and knowledge of the freelance landscape to help guide us into the future. Ready to step up? Submit your application here! Applications will be accepted from October 12-26, after which the Freelancers Union nominating committee will interview candidates and make their recommendations. The candidates they recommend will then be up for a vote from the full Freelancers Union membership. The newly elected Member Representative’s first board meeting will be the Bi-Annual Meeting in January 2022. via Freelancers Union Blog https://blog.freelancersunion.org/2021/10/12/its-your-turn-to-be-the-next-freelancers-union-member-representative/
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Any singer will tell you that rolling out of bed and immediately making your most beautiful sounds is an unrealistic expectation. It can take hours of being awake and warming up before you’re in your “best voice.” I’ve noticed a parallel with writing. It feels like a big ask to roll out of bed and dive into writing something of value. There’s a certain amount of warming up that’s required to activate those creative parts of the brain. For me, this warming up involves meditating for 10-ish minutes, and then reading for an hour or so. Invariably (so far), something in the reading will light up that “ah-ha” part of my brain and send me to the keyboard. Another writing warm-up I’ve used in the past is Julia Cameron's practice of morning pages (see The Artist’s Way). If you’re not familiar, the idea is to do three pages of journaling every single morning, as soon after you wake up as possible. The quality isn’t so important; the content isn’t meant to be shared. The focus is on quantity, just getting whatever is in your brain onto a page. Beginning your day from a generative place, rather than a reactive place. While I haven’t followed this practice in a while, I see a direct pedagogical link between the morning pages for writing, and, say, scale work or lip trills for singing. You don’t perform lip trills for an audience (usually), and you don’t turn your morning pages into blog posts (usually). It’s about getting the blood flowing to the muscles—or the ideas flowing to the brain, as the case may be. Whatever your version of creativity may be, how might you build a warm-up practice in order to create your best work? Originally published at https://nathaniel-sullivan.com/reflect via Freelancers Union Blog https://blog.freelancersunion.org/2021/10/07/whats-your-warm-up/
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Working for yourself as a freelancer or solo entrepreneur provides freedoms and benefits unlike any other. You make your own schedule and work from anywhere. However, there are many legalities you must consider so you are not held legally or financially liable for things that could have been prevented. A new freelancer may not be aware of these issues, but this guide will help you on this path. What Are Some Legal Issues to Consider?There are many legal issues to consider when freelancing and starting your own business. You will need to ensure that contracts, copyrights, and business registration are all in place should the unthinkable happen. ContractsContracts are legally binding between the client and the business. The standard contract will outline a variety of things, such as: ● Termination ● Ownership of ideas ● Copyrights ● Payment schedule Contracts can range in content, as each business is unique and requires different elements to be considered. You may want to include your rates and consequences of nonpayment. The best way to determine what to include in a contract is to meet with an attorney and obtain legal advice. They can also draft up a contract for you to use. Or, you can use Freelancers Union's free contract creator tool to build a contract that reflects your business' needs. Business RegistrationOne of the most important parts of staying protected is registering your business entity. This will also be important when it comes to taxes and insurance. You should also consider trademarking the name and other elements of the business entity. You will need to ensure that the name you choose is not already trademarked or registered, as this can open you up to lawsuits if you choose a name that someone has already trademarked. They can essentially be compensated for your use of the name. There are two key options for registering your business: sole proprietorship or an incorporated business. The differences lie in the financial liability that each one carries. InsuranceBusiness insurance is crucial to your business operation, and there are many different options for you to choose from. The right insurance policy will depend on the type of work you are doing and the type of services you provide. General LiabilityThe first type of insurance to consider is general liability. It is also one of the most important ones to protect you against common workplace accidents and more. This can also cover mishaps like spilling a drink on an expensive piece of tech. There are also other types of protections this policy has, such as against slander, libel, trademark infringement, and copyright infringement. Professional LiabilityThis insurance covers potential claims against professional services. This covers professional errors like making a mistake on a project or delivering incomplete or late work. It can also cover negligence in work. Cyber LiabilityWith the majority of work and client interactions taking place online, cyber insurance is a way to protect yourself against the risks that come with it. This insurance will focus on data breaches and will help to pay for notifying customers, forensic services, legal services, and business interruption expenses. It can also pay for customer credit and fraud monitoring services. Personal InsuranceBeing a freelancer or sole practitioner means that you do not have some of the same insurance options that you would have in a typical workplace. You will need to think about life and health insurance, as well as disability insurance. Home, renter's, and auto insurance are other policies that you will need to consider for yourself and any employees you may bring on. What to Include on Your WebsiteThere are several legal elements you should include on your website to keep yourself protected. These are often things that visitors do not click on immediately and exist solely for legal reasons. You should have a Terms of Service and Privacy Policy on the bottom of your website. Each of these pages will need to have certain elements discussed. For the privacy policy, you should include things like: ● Receiving and withdrawing consent ● Collecting information ● Storing payment information ● Third-party services ● Disclosure practices ● Changes to the privacy policy On The Terms of Service page, you should include the following: ● Billing and membership information as needed ● Eligibility ● Disclaimers ● Agreements ● Privacy policy ● Changes to the privacy policy and other agreements You should include any important elements that will protect you during a legal dispute of any kind. Do not skip on creating these pages as you can have many legal issues if you do. Marketing Your Freelance BusinessYour business cannot grow without clients, and to get more clients, you will need to do some marketing and advertising to draw them to you. This is done by determining your target market. When it comes to marketing, you will at minimum need to build a great website and social media presence. You should encourage referrals and survey your customers. Online reviews are a great way to convince customers to pick your business over others. When advertising, try not to focus on price, as this can change with the needs of the company. Instead, focus on other qualities that your business offers. Make sure that any claim you make can be substantiated by the product or service you offer. Becoming a freelance or sole practitioner is a great adventure to go on, but you must be sure that all the legal issues are managed appropriately. You never want to be caught in a legal battle if you can avoid it. via Freelancers Union Blog https://blog.freelancersunion.org/2021/10/06/avoid-these-common-legal-headaches/ |
AuthorI have 5+ years experience working as a medical transcriptionist. When I am not working, I enjoy sports like playing basketball or judo. I love making friends and connections. Archives
April 2023
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