There can be a lot of perks in working from home. In fact, many business owners may have launched their startups based on all the advantages they perceived in being self-employed. But for those who are considering the transition, it’s important to have a reality check before giving your two-week’s notice. Here are five things you should be aware of before you start working from home.
1. The self-employed are self-disciplined. Howard Hook, a certified financial planner and public accountant in Roseland, N.J. says, “If you are not disciplined enough, you can be much more inefficient than if you were at work.” When preparing to work from home, consider that there will probably be more distractions there than there ever could be in a cubicle. Many want to work from home because they love the idea of logging billable hours in their pajamas. Unfortunately, many do not possess the self-discipline require to actually work when they could be surfing the internet or watching day-time television. There are plenty of interruptions you’ll have to manage in your home office.
2. The watercooler is gone. The social interaction found in a traditional work environment can be gratifying for many. However, when working from home, that adult interaction is reduced to a minimum, and while you will interact with clients, those relationships may not be as personal or extensive as you would like. For those that thrive on social interaction, this will be something to consider before taking the leap.
3. There’s no paid vacation or personal days. While on an extended family vacation to the Oregon coast, I awoke at 5am every week day in order to get some work done. My family balked at my version of “vacation.” Unfortunately, because I am self-employed with deadlines to meet, I did not have the luxury of getting paid time-off, a detail many of those eyeing self employment will want to consider.
4. Beware of the tax requirements. Claiming a home office is not a red flag for the IRS like it once was. It’s more common for individuals to claim a home office these days, especially since nearly half of small businesses are operated from owners’ homes. So when working from home it’s important to take advantage of home office tax breaks. However, qualifying can be tricky if you’re unaware of the IRS’s requirements. This one phrase, “regular and exclusive use,” is the requirement to which you must pay particular attention. The area in which you conduct business must only be used for business purposes. And the IRS is serious about this detail. In an article on SmartMoney.com, Martin Nissenbaum, National Director of Personal Income Tax Planning at Ernst & Young, is quoted as saying, “Exclusively really does mean exclusively. The rule is clear. You can use the space only for your trade or business. If you happen to have a TV set in there and you watch it while you’re working, fine. But if your kids play there and you use it as a den, you cannot take a home office deduction.”
5. Professionalism is still required. While your home environment may feel more relaxed, you are still required to act professionally. And if clients are invited to your home office, it’s important that it provide a business atmosphere. While it’s true that looks can be deceiving, many clients will judge your professional capability on the image your project.
We’re not trying to scare you away from self-employment with this reality check. We are, however, helping you fully prepare to work from home. When you’re able to clearly recognize both the pros and the cons, you’re better equipped for success.
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We welcome and encourage your questions and comments! Please let us know what you think of this article.
Resources
McCuan, Jess. “Setting up a Home Office that Qualifies for Tax Breaks.” 6 June 2007. SmartMoney.com.
Mueller, Karin Price. “How to Create a Productive Home Office Space.” 2 April 2010 Entrepreneur.com
