I have been self-employed and largely working from home since 2003. I also work with many freelancers, independent contractors, and small businesses–from sole proprietors doing business under trade names to single-shareholder corporations and one-member limited liability companies. Notice that I group all these workers together. In many ways they are the same, but they don’t always realize it. The pandemic has made distinctions among various worker classifications even more confusing, especially where working from home is concerned. Not everyone working from their kitchen tables, children’s school desks, or a home office is in the same category, even if their day-to-day experiences are very similar.
What are your most common expenses when working from home or freelancing?
I have worked from home in two different capacities, and the expenses deductible from my taxable income is different for each. Thus, I will address them separately and encourage you to do the same.
Sometimes, I have taught online courses from home, as part of my employment as adjunct faculty. I rarely have expenses unique to that work because it is very part-time. Food delivery is not directly related to something I am doing two hours per day, so I don’t consider it a work-from-home expense and doubt the Internal Revenue Service would, either. Conversely, software or books I had to purchase and that weren’t reimbursed by my employer might be.
In my work for my own business, I have far more expenses I would not have if I weren’t self-employed. I wouldn’t need this website, maintenance of the website, marketing services, accounting assistance, and certain software (e.g., bookkeeping, case management, file sharing, time tracking, videoconferencing). I also pay for upgrades to some services like internet and phone because I use them in the business. I track all these expenses and deduct all or a portion of them from my taxable income when I file my income tax returns.
Do you keep track of these expenses? If so, how do you do that?
Yes, I track my expenses for the business in bookkeeping software. For my personal and employment-related expenses, I use a separate software service. However, I have clients and loved ones who use Excel spreadsheets and notebooks. Much depends on how many categories of expenses and transactions you have. If your freelancing work is a side gig, an Excel spreadsheet might be enough for now. When it becomes your primary source of income, you will probably want to upgrade.
Not sure about worker classifications?
Nance L. Schick, Esq., is an employment attorney, ethno-religious mediator, conflict resolution coach, and diversity trainer based in New York City. Her goal is to keep managers and small business owners out of court and build their conflict resolution skills–so everyone has a better work experience. She is creator of the Third Ear Conflict Resolution process, author of DIY Conflict Resolution, and an award-winning entrepreneur acknowledged by Super Lawyers (ADR, 2018, 2019 & 2020), the New York Economic Development Corporation/B-Labs (Finalist, Best for NYC 2015 & 2016), U.S. Chamber of Commerce (2015 Blue Ribbon Small Business), and Enterprising Women Magazine (Honorable Mention, 2014 Woman of the Year awards).