Deciding how much to charge clients is always a tough decision (see our previous post). Obviously, you’re opening a freelancing or consulting business on Zoondy to make money. You may be looking for extra income to help ends meet, start a college fund for your kids or add to your own retirement fund. If you’re unemployed, freelancing or consulting may be a way to generate income and fill the time gap in your resume while you hunt for a job. Or it may even be the start of a new career. But the bottom line is you’re in it to make money.
It’s important to keep that goal firmly in mind when setting your hourly rate because you’re going to run into clients that want a bargain or that will pressure you to match the cut-rate fees of warehouse sites that make their money on volume but are often lacking in quality. When you go into business for yourself, you have to have confidence in your worth and be willing to walk a client that isn’t willing to pay your price.
To determine your hourly rate, you’ll need to do a little research:
- Review IRS information on self-employment and sole proprietorships. You’ll find free downloadable pamphlets and tax forms at IRS.gov (you can also request mailed copies). Knowing what the IRS requires not only provides a guide for the kind of expenses you might entail as a self-employed freelancer, it also indicates what records you’ll need to keep and prepares you for the taxes you’ll be required to pay. At minimum, in addition to a 1040, you will probably be required to file Schedule C Profit or Loss from Business, 8829 Expenses for Business Use of Your Home, and Schedule SE Self-Employment Tax. And don’t forget about state and local taxes. You should also review requirements for quarterly tax payments. Knowing the tax rules that may apply to your freelancing or consulting business and including your tax liability in your fee structure will prevent any unpleasant surprises when taxes are due next April.
Continued next time