Working as a Self-Employed Contractor

by William Henderson

Self-employed contractors don’t work for anyone per se, but provide services to a client who usually pays by the project or using a predetermined hourly rate. While self-employed contractors can enjoy plenty of opportunities, they can just as easily go without work if their services are not needed. You should consider the pros and cons of working as a self-employed contractor before deciding to do so.


Freelance opportunities exist in a variety of fields, such as writing and editing, photography, psychology, social work and education. Self-employed contractors often can set their own hours and work where they want, whether their local coffee shop or a home-based office. If the idea of being your own boss, taking on the assignments that most interest you, working in your home and taking time off when you want interests you, then working as a self-employed contractor may be right for you.

Potential Cons

Self-employed contractors may like the idea of working when and where they want but they likely don't get vacation or sick pay to cover times when they aren't working. Other potential cons are not being able to invest in an employer-sponsored retirement plan, not enjoying the same legal protections that traditional employees have, paying their own business-related costs and not having regular contact with people outside of e-mail and telephone conversations.

Tax Liabilities

If you are self-employed, you must file a tax return if you earn more than $400, and may need to file a return even if you earn less than $400. The IRS recommends you pay estimated taxes every quarter. Self-employed individuals must pay self-employment tax, which is a Social Security and Medicare tax, and income tax. Before filing your tax return, you must calculate your profit or loss for the year. The IRS provides instructions for doing this along with the forms you need to file.


Self-employed individuals can deduct expenses related to operating a home-based business. The IRS limits your deductions to expenses related to the part of your home that you use solely for your business. You can write off part of your rent or mortgage expenses and utility costs, including electricity and telephone. You can also deduct money you spend on supplies and other business-related expenses. If your contracting work requires you to travel, you can write off these expenses as well, including the cost of your meals while traveling. For any expense you tend to write off, save receipts. The IRS can audit self-employed individuals and you must be able to back up any deduction you claim.

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