Thanks to the growing economy freelancers and virtual workers are on the rise.
According to the virtual assistant platform Upwork 57.3 million people in the U.S. freelance full time. This is exciting news for parents who want to work from home to spend more time with their family.
Working virtual comes with a lot of benefits including the flexibility to choose the hours you work and the assignments you want to work on.
However, there are some downsides to leaving your full-time employment for freelancing, such as, giving up benefits that are important to you and your family. One of those benefit is the opportunity to contribute to a flexible spending account (FSA) known as a personal saving accounts that can be used for qualifying medical expenses. Because the funds are usually deposited into the account on a pre-tax-basis, it reduces the employees tax liability.
Unfortunately, the IRS does not extend the FSAs benefits to self-employed workers.
However, if you are a full-time employee and your employer offers this benefit you may still be eligible even if you work freelance on a part-time basis. You may also be able to contribute to a FSA account if your spouse’s employer offers this benefit.
The alternative for full-time freelancers and virtual paralegals is the child tax credit (CTC) and the additional child tax credit (ACTC) that can help offset the cost of childcare. These tax credits are up to $1,000 per qualifying child. The child must be under 17, have lived with you for at least half of the tax year, and be a U.S. citizen.
So be sure to explore your tax advantaged options with a qualified accountant or financial specialist when deciding to launch a virtual paralegal business or transitioning from part-time to full-time.