June 24, 2018

Employer-Provided Benefits Shouldn’t Keep You From Being a Freelance CPA

employer-provided benefits

Please enjoy this sponsored content from Beech Valley Solutions. You can read more their partnership with Accountingfly here.

There’s a lot of legitimate reasons why freelancing may not make sense for you right now.

Maybe one of your superiors at your firm is a fantastic mentor who has taken you under their wing.

Maybe you’re in a specialty group, getting valuable experience you could never replicate elsewhere or on your own.

Or maybe you were on the losing side of a bet with a friend on the 2002 Western Conference Finals, and the loser had to work his or her entire career in public accounting. Even though the series was clearly fixed, here you are…

But of all the potential reasons that being an independent consultant might not be for you, the most commonly cited reason is nonsensical: that you need your employer-provided benefits.

The general perception is that individual insurance plans:

  • Are difficult to obtain.
  • Are prohibitively expensive. Like, sail-a-yacht-around-the-world-with-One-Direction expensive.

So we’re going to address both of these sentiments here.

Insurance is difficult to obtain on my own.

Bookmark this post, because this will prove to be an indispensable resource on your quest to obtain insurance.

A step-by-step guide to obtaining insurance:

1) Go to ehealthinsurance.com.
2) Put in your information.
3) Get quotes.
4) Pick your favorite plan.
5) Sign up.

Estimated time to complete: 5-7 minutes, depending on internet speed.

Insurance is expensive. I will never be able to recoup the value of my employer-provided benefits working for myself.

Total insurance cost will vary depending on your situation. Does your spouse’s employer provide benefits? If so, just get on his or her plan.

If not, no need to speculate. Follow steps 1-3 above to receive quotes.

In addition to health and dental benefits, you’re also going to want to check out disability and possibly life insurance. To determine what coverage you need, take this 5-minute assessment from Policy Genius.

Generally speaking, disability and life are significantly cheaper than health insurance.

My total insurance cost is about $4,000/year. Your costs may be cheaper or more expensive than that, but either way, it really won’t matter.

Which takes us to…

…the big picture

So yes, you do have to pay for your own benefits when you work for yourself.

But when you can make substantially more money by freelancing, does it matter if a small portion of those incremental earnings goes towards paying for your own insurance?

Let me ask you this: If you won the Mega Millions, would you not claim your winnings because you’re concerned about the gas money required to do so? No. No, you wouldn’t.

What about PTO?  My company pays me three weeks of the year to not work.

With PTO the implication is that you get “paid” to not report to work for a few weeks out of the year.

But here’s the kicker – what about all those hours you’re working in excess of 2,080. (i.e. – 40 hours/week for 52 weeks)?

If at the end of the year, you’ve recorded 2,200 billable hours, are those three weeks of vacation really paid time off?

In my mind, you’re not getting a single minute of paid time off in any logical sense of the term. What you’re getting…err giving I mean… is unpaid time on for all the hours worked in excess of 2,080.

As a freelancer, if you bill 2,200 hours, you get compensated for all 2,200 hours. Imagine that.

What about employment taxes? Won’t I have to pay the employer portion of payroll taxes, an extra 7.65%?

We’ve addressed this before. The short answer is that with basic tax planning, your taxes will be similar or less than that of an employee who earns comparable compensation through salary.

And lastly, how does my income as a consultant compare to that of a salaried employee?

See for yourself using our freelancer compensation calculator. The results just might astound you.

Or check out this analysis here, which includes the hidden costs of running your own business. As an independent consultant, you should be able to pick up tens of thousands of dollars in incremental earnings, while your expenses will increase by only a few thousand dollars.

Brad Hughes is a co-founder of Beech Valley Solutions, the premiere network that connects CPAs with freelance opportunities in advisory, assurance and tax.  Beech Valley consultants enjoy higher pay for every hour worked, the flexibility to accept or reject projects, and the ability to diversify their skill sets.

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Give It Up Tax Protesters, You’re Just Screwing Yourselves

Of the adherents of strange and puzzling belief systems – 9/11 Truthers, Fed groupies, Cubs fans – few work so hard to screw themselves as tax protesters.

By their own account, twww.rothcpa.com/archives/000480.php”>spend “thousands of hours” reading their arcane tracts, expanding on theories of why the 16th Amendment is a figment of our imagination, or why a gold-fringed flag means you’re in an admiralty court, which somehow undoes the income tax.

Or why the federal tax law only covers the District of Columbia and federal forts, or why Section 861 says U.S. source income isn’t taxable. The result? They still owe the taxes, penalties, and maybe $25,000 idiot fees from the tax court – and that’s if things go well. If they go badly, they go very badly.

Every year the IRS updates its handy debunking of tax protester arguments. It does little good. You can spend hours trying to talk tax protesters out of their ideas, but they move effortlessly from one gold-fringed bad idea to another, and they can almost sound like they make sense, until you get outside and get some fresh air. But there is one common problem in all of these “Tax Honesty” arguments: they don’t work.

No matter how convinced you are that Irwin Schiff’s theories of the income tax are true, that there is no income tax, all of the federal judges think there is one. So does the IRS, the Federal Marshals Service, and pretty much everyone in the Bureau of Prisons. What they say trumps what Irwin says, which is why the poor man is likely to die in jail.

But what about the glorious courtroom triumphs of Lloyd Long, Vernice Kuglin and Tom Cryer? They were acquitted by juries! Yes, these guys beat criminal charges. Why the juries voted the way they did, we’ll never really know. Maybe they were nullifiers, striking a blow against the income tax. Maybe they decided that the defendants really believed their schtick, so they didn’t “willfully” fail to pay their taxes. But these acquittals debunk the income tax only if the O.J. acquittal debunks California’s murder statute. Even though these guys didn’t go to jail (unlike many, including their pied piper, Irwin Schiff), they still have to pay their taxes.

Maybe you’re reading this and thinking “Of course he says that. He does taxes for a living. He’s in on the conspiracy!” If so, come on. If this stuff actually worked, I wouldn’t grind my way through every tax season pretending there is an income tax. If it worked, I would just talk to a few of my wealthiest clients, work out a deal to take 5% of their income for the next 10 years in return for making their taxes go away, wave my wand, and spend March in Mesa.

But here I am, grinding out those returns. That no more makes me “pro-tax” than believing in germ theory makes a doctor “pro-bacteria.” Still, if you really want to ruin your financial life, you’re welcome to choose your poison. But first ask yourself: are all of these big companies and rich guys who pay taxes crazy or stupid? Or is it just you?