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Oh, there is one more tiny matter: taxes. Make sure to take a 1/3 of each invoice you are paid and put it into savings for taxes. Seriously, you don’t want to m

Oh, there is one more tiny matter: taxes. Make sure to take a 1/3 of each invoice you are paid and put it into savings for taxes. Seriously, you don’t want to make this mistake. Also, you will have to pay taxes quarterly (well, more specifically, to make estimated payments each quarter). Withholdings at day jobs abstract away the quarterly obligation, allowing you to file once a year (and, usually, get a refund) but freelancers aren't allowed to hold money owed for 9 months and collect interest; they have to pay more quickly. Here's the solution I came up with for the brokenness of the freelance economy (especially the time wasted in marketing). http://michaelochurch.wordpress.com/2013/05/07/fixing-employment-with-consulting-call-options/ http://michaelochurch.wordpress.com/2013/05/07/fixing-employ... It does require you to sell some of your upside, but that's actually a really good thing, because the option holder (who is probably richer and better-connected than you, and therefore requires an order of magnitude less effort to market you) now has an incentive to participate in your marketing process.

anu_gupta 13y ago
> Also, you will have to pay taxes quarterly If you're in the US. In other countries, different tax regulations apply.
- k-mcgrady 13y ago
  Glad this was clarified. I'm in the UK and pay taxes once per year (and National Insurance every few months). Thought I'd been missing something for a moment :)
jasonkester 13y ago
you will have to pay taxes quarterly Have you ever tried not paying your taxes quarterly? The penalty is only a few hundred dollars. As in, one or two billable hours. As in, not enough to justify taking time off from paying work to do them those extra three times a year. In years where my memory is especially good and I remember that I'm supposed to do quarterly taxes, I'll send off an enormous check at some point over the summer for about what I paid in taxes the year previous, with my SSN scribbled on it. That's actually surprisingly effective. Most years, I let it slide and simply tack on an extra 0.4% to my total tax bill in April.
- jdminhbg 13y ago
  This is the strategy I also employ -- generally by the 1/15 date I send a check for what I sent the year before. I don't even bother sending estimated state income tax, that works out to like a $25 penalty by the time they get back to me.

anu_gupta 13y ago

> Also, you will have to pay taxes quarterly If you're in the US. In other countries, different tax regulations apply.

k-mcgrady 13y ago
Glad this was clarified. I'm in the UK and pay taxes once per year (and National Insurance every few months). Thought I'd been missing something for a moment :)

jasonkester 13y ago

you will have to pay taxes quarterly Have you ever tried not paying your taxes quarterly? The penalty is only a few hundred dollars. As in, one or two billable hours. As in, not enough to justify taking time off from paying work to do them those extra three times a year. In years where my memory is especially good and I remember that I'm supposed to do quarterly taxes, I'll send off an enormous check at some point over the summer for about what I paid in taxes the year previous, with my SSN scribbled on it. That's actually surprisingly effective. Most years, I let it slide and simply tack on an extra 0.4% to my total tax bill in April.

jdminhbg 13y ago
This is the strategy I also employ -- generally by the 1/15 date I send a check for what I sent the year before. I don't even bother sending estimated state income tax, that works out to like a $25 penalty by the time they get back to me.