Prior to the Industrial Revolution, there were very few laws governing business or employer/employee relationships. Abuse was rampant, and there was rarely any recourse for injuries or maltreatment. Over the last century, government regulations have been passed to monitor nearly every aspect of operating a business. While there are few laws that specifically relate to working from home, some do apply.
Working from home has a long tradition in America. At one time, nearly everyone worked from home, usually farming. That changed with the Industrial Revolution when workers sought better-paying jobs. The technology boom in the 1980s created a renewed interest in working from home. Affordable computers, improved fax machines, and the Internet made working off-site possible. By 2001, an estimated 19.8 million people were enjoying the work-at-home life.
As more people began telecommuting, concerns about the safety of home offices were raised. In 1999 OSHA stated that employers were responsible for making sure that their telecommuting employees had a safe working environment, but soon realized that enforcing the law would be impossible. The directive was withdrawn in April 2000, and all safety issues regarding home offices are now the responsibility of the employee. Likewise, freelancers and home-business owners are responsible for their personal safety while working, and there is currently no government agency that monitors workplace safety for home-based workers.
Regular employees complete a W-4, and at the end of the year, the employer provides a W-2 Statement of Earnings, which is used to file income taxes with the IRS. While a telecommuter completes a W-4, freelance workers and home business owners do not. For non-incorporated businesses and freelancers who earn more than $600 from a single company, the W-2 equivalent is a 1099. Unlike the W-2, however, the 1099 shows only the amount earned. No taxes are deducted from a freelance worker’s pay; in addition, neither the freelancer or home business owner is eligible for employer-sponsored unemployment payments.
Freelance workers and home business owners are responsible for their own taxes and can pay in one of two ways: quarterly or one lump sum. Paying quarterly entails sending a percentage of earnings every three months. Since most freelance workers do not have a regular income, the amount paid is an estimate, often based on previous years. Any overpaid amounts are refunded. The second way is to file income taxes at the end of the year stating the actual amount earned, and pay the tax in one lump sum. The method you choose depends on your income and financial planning abilities. For tax identification purposes, a freelancer and a sole proprietor can use her Social Security number. Incorporated home businesses must apply for a tax identification number.
Zoning and Licenses
Most telecommuters and freelancers use technology to connect to a client’s office. Since most of today’s homes already have this equipment, zoning laws rarely apply. For home business owners, however, zoning ordinances, which were created to separate residential areas from industrial noise and pollution, can be a significant hurdle. Licensing is another issue specific to home business ownership, and before business can be legally conducted, a license is often required.