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A Comparison Guide:
Self Employed vs Freelancers
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Self-employed
Freelancer, independent contractor, etc
Salaried employee
Full-time or part-time W-2 employee
Business owner
LLC, S corp or partnership
What's the difference between a self-employed individual and a freelancer?
Working independently can bring a lot of freedom. Freelance workers and self employed people can benefit from this lifestyle by creating a better work-life balance and growing professionally.
The terms self employed and freelancer may seem like they can be used interchangeably, but there are some stark differences between them. You might be self-employed, but it doesn’t necessarily mean you’re a freelancer. You might have your own accounting business or own a pastry shop.
But whether you’re a freelancer or self-employed, you’ll most likely be filing your own self-employment taxes. This comparison guide will help you understand what freelance work entails, what it means to be self employed and the similarities and differences between the two.
Table of contents
Key Takeaways:
- Every freelancer is self-employed but not every self-employed person is a freelancer
- There are 3 main types of self-employment
- The tax requirements are the same
What is a self employed individual?
The definition of self employed is someone who works for themselves as a freelancer or business owner. They might be a sole proprietor or an independent contractor.
So if you’re asking yourself the question, what is a self employed individual? They usually are someone skilled in a trade, skill or profession and set their own terms and conditions, rather than following an employer.
When choosing your self employed occupation path, you have to consider whether you want to work in a partnership, Limited Liability Company (LLC), corporation – like S Corp or C Corp, a sole proprietorship or even an independent contractor.
What does it mean to be self employed?
When you’re self employed, you work for yourself and aren’t an employee at a company or business. It also means you’re responsible for paying your own taxes.
When you're self employed, you’re not eligible for automatic benefits that an employer may provide like paid sick leave, holiday or vacation days, 401(k) matched contributions, health insurance or maternity leave. You also can’t apply for unemployment or worker’s compensation benefits.
Plus, you’ll need to provide your own equipment, like a computer, printer or anything else you might need for your work. But, you can take tax deductions for a variety of things that can help lower your taxable income.
What does freelance mean?
The freelance definition is someone who has a profession without a long-term commitment to one set employer. The true freelance meaning is someone who earns money on a per-task or per-job basis.
Freelancers usually have multiple projects happening simultaneously and clients pay for their product or service. Freelance workers are considered self-employed. But the main difference is freelancers' work revolves around client expectations, projects and assignments. Usually, a freelancer works on their projects alone.
What is freelance work?
Freelance work usually depends on the client. The client needs to approve the project timeline, budget and payment terms. Payment may depend on how satisfied the client is with the work.
Some examples of freelance workers include:
- Graphic designers
- Photographers
- Caterers
- Private tutors
- Sports instructors
- Writers
Quick tip
A business license might be required for freelancers depending on the type of work and your location.
Self employed vs freelancer
Every freelancer is self-employed, but not every self-employed person is a freelancer. Let’s look at some of the differences.
Clients and contracts
Multiple jobs
Nature of work
Clients and customers
Other work
What about taxes?
Whether you’re self-employed or a freelancer, taxes are still something you’ll need to manage. The IRS considers freelancers as self-employed when it comes to 1099 tax filing.
That means you’re responsible for filing and paying your taxes. Anyone self-employed must pay FICA taxes, including Social Security and Medicare taxes.
As a W-2 worker, your employer usually contributes half of your FICA taxes. But anyone self-employed has to cover the total 15.3%. 12.4% is for Social Security and the remaining 2.9% is for Medicare.
You won't have to file self-employment taxes if you make less than $400 from freelancing.
If you expect to owe $1,000 or more in taxes for the year, you’re required to file quarterly tax payments. These estimated tax payments occur four times a year.
To help calculate estimated tax, you can use a tax calculator.
Estimated quarterly taxes are due on April 15, June 15, September 15 and January 15 of the following year.
What’s FlyFin?
FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors.
But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. to find every possible tax deduction.
Then, the CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes.
Download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and more money on your taxes than last year, guaranteed.
Expert tax CPAs ensure 100%-accurate tax filing
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