Work at Home: Interview with Diana Fitzpatrick
This is a transcript of a podcast posted on April 22, 2008.
 Nolo: Hello. We’re speaking with attorney Diana Fitzpatrick, a legal editor for Nolo’s small business books, and the co-author with Steve Fishman of the Nolo USA Today book, The Work From Home Handbook: Flex Your Time, Improve Your Life. In her spare time, Diana is also an ultra runner. Diana, maybe you can start out by explaining, what exactly is an ultra runner?
Diana Fitzpatrick: Ultra running means you run more than the marathon distance -- 26.2 miles. Really, anyone who races above that distance is considered an ultra runner. So, a 50k, 50 mile, 100 mile, those events are all ultra running events.
Nolo: Diana, the Work From Home Handbook has a lot of great tips. One thing I do wonder about, though -- what are the meanings of those strange terms used to describe working at home: teleworking and telecommuting?
Diana Fitzpatrick: Telework and telecommute are now used pretty much interchangeably. Telecommute is heard more often here in the United States, and telework is more of a European-based word. But telework is really broader, too, because it means you’re able to work remotely from any location. Telecommute is still tied into the idea of not commuting.
Nolo: Your book describes many home-based businesses, but one of them really caught my attention -- that was the home-based mock juror. Can you explain what this work-from-home position entails, and how we all can get in on this opportunity?
Diana Fitzpatrick: Lawyers who are preparing cases often like to test out their arguments, theories, cases on a jury -- a mock jury -- before they present it, and so instead of putting together a live audience, you can go on the Internet, sign up to be a mock juror, and you will get a written case, a written summary of arguments or a written summary of the case, and then you give your response to that. It pays pretty well, and it can be interesting, too. I mean, you can earn anywhere from $30 to $60 for a review of a case, which really doesn’t take that long -- it might include a little video, some reading, and then some answers.
Nolo: Your book also advises against many of the home-based work scams that are out there, so maybe you can describe a few of these scams so listeners will know what to avoid.
Diana Fitzpatrick: Yes, this is a real problem in this area, unfortunately. For every real work-at-home opportunity, there are a lot of scams, so you have to be careful. A red flag is any time you have to pay money to get started on your work. So, for instance, a whole line of them are these product assembly scams where you’re supposed to buy the product or kit and put something together, and give it back to the company or sell it, and in fact it’s something that can’t put together properly, or you’re left holding this property unable to get your money back.
Another area where there’s a lot of scams are the medical claims processing scams, and that’s because there are actually a lot of opportunities in the medical claim area for transcriptionists, transcribing medical data, but there are also lots of scams where you’re told to buy a list of doctor names, contacts, and maybe some instructions on how you can get in on this business. So, you buy it, and in fact all you’re getting is a list of contacts that are out-of-date and instructions that really don’t get you anywhere. So, instead you have to find a legitimate looking business.
If it looks too good to be true, it probably is. If it’s saying you can earn thousands of dollars from your home with no skills in a month, it’s probably not the case, so you’ve just got to screen carefully like you would with anything, and check references, and do as much research as you can.
Nolo: Your book really deals with the two types of work-at-home scenarios. One is where you take your day job home, and the other is where you employ yourself as a freelancer at home. So, those are two major differences -- employee and independent contractor. Can you give us a few of the issues that a work-at-home contractor would have to deal with that her employee-at-home counterpart would not?
Diana Fitzpatrick: Yes, these are two very different scenarios. You know, as a work-at-home employee, you are an employee of another company, so you have a regular paycheck, steady income, health benefits. When you work as a freelancer, you give that all up, and probably first and foremost, you’re on your own, so you have a lot of freedom, but you have the pressure of finding the work and getting those jobs, and usually it’s the project-based work that freelancers rely on.
You also have other responsibilities. I mean, you also have to figure out how to set your rates, and how to generate the business. Then, a whole other side of it is the taxes and the bookkeeping responsibilities that come with it. You get tax deductions that at-home employees don’t, so you have huge benefits on the tax deduction side, but you also pay more taxes up front. You pay Social Security and Medicare [taxes], you’re responsible for all of those, and you pay your taxes quarterly, so you also have to be responsible about that, making your estimated quarterly tax payments.
Nolo: A work-at-home freelancer can really clean up in the tax deduction department. Can you talk about some of the deductions that are available to freelancers working at home?
Diana Fitzpatrick: As a freelancer, you are able to deduct all of your business expenses, which is something that you can’t do as an employee. There are a very limited number of deductions that you get as a work-at-home employee. So, as a freelancer, all of your business expenses -- and those are anything that’s ordinary and necessary, and related to your business -- those are all deductible. And, of course, say you have a car and you use it partly for your business, and partly for your personal use, then you have to apportion that so that you’re only deducting the actual percentage that you use for business. So, all those costs -- car, advertising, any supplies, any equipment that you use -- all of those expenses are deductible.
Another big one for freelancers is often the home office deduction as well. There are a host of very specific requirements that you have to meet to get the home office deduction, but basically you do have to have an area of your home or wherever it is that you have your home office that you set aside and use it exclusively for business. So you can’t use it during the morning hours for personal use and then during the afternoon hours for business use. It has to be used exclusively for business. You also have to be able to show that it is your principal place of business. Those are the two main requirements, although there are others that you also have to meet. Once you meet those requirements -- say you have a room set aside in your house that also is your home office -- you figure out what percentage of your house that is, and then you can deduct that percentage of cost whether it’s your rent, utilities, mortgage, taxes, insurance… and then you can also even do other related costs like cleaning, painting. All of those are also deductible.
Nolo: If you’re trying to convince your boss that you should work at home, what’s your response if your boss says, “Well, if I let you do it, I’ll have to let everybody do it?”
Diana Fitzpatrick: First of all, working at home is not for everybody. A lot of people really look forward to having an office to go into and like the social side of work. I mean even for me personally, I tend to come into work. I have the flexibility to work at home, but I do come in, because I like that side of work. Not only is it not for every person, but also not all jobs are suited for working at home, and as hard as you might try, there are certain people at certain offices that are not going to be able to do their job from home.
Nolo: What are some of the concerns when a work-at-home freelancer decides to take on employees?
Diana Fitzpatrick: If you end up hiring employees, you take on a lot of, again, tax-related responsibilities. You have to file quarterly employment tax returns with the IRS, and you also have to pay federal employment tax for those employees. Those you usually have to pay monthly, setting up an account, automatic deposit, whatever, but again you’re responsible for that, so that’s half the employees’ Social Security and Medicare, and there’s also unemployment tax with FUTA. The other half, you would have to withhold from the paychecks, so you have to know about the IRS federal employment tax obligations, and then on the state side, you’ll probably also have to withhold state income tax and pay that to the state, and you also may have to pay state unemployment insurance. So, you need to learn about and figure out how you’re going to satisfy both the federal and state tax obligations as an employer.
Nolo: What kind of issues arise when you work for an employer who’s in another state?
Diana Fitzpatrick: That’s something that’s coming up more now, and the risk there is, say you live in New York, and you’re working for an employer who’s based in Connecticut, there is a chance that you will have to pay taxes in both those states. It’s known as the “convenience of the employer” test. It’s possible that you will get a tax credit from your home state, but the state of your employer will probably be trying to collect taxes from your work. Sometimes they try to apportion it, so there was this case of this guy who was living in Tennessee and working for a New York employer, and wanted to apportion his time and taxes, and the case was won by New York, saying that under the convenience of the employer test, the employer was based in New York, and they could collect 100% of the tax. He also owed tax in his home state, but like I said, you may be able to get a tax credit for that.
Nolo: I know your book is jointly published with USA Today, so it’s heavy on statistics. Can you give us some numbers regarding people who are working at home?
Diana Fitzpatrick: This is definitely a growing area. As recently as 2000 there were only six million people that were telecommuting, and now it’s twelve million, and they’re projecting that by the year 2009 there will be fourteen million people who telework. That would be 25% of the work force. There’s a higher percentage of people in Europe, Australia. In other countries, this is even bigger.
It really makes sense in this day and age when you can work from anywhere with technology: laptops, PDAs, high-speed internet. There’s really no reason people have to be tied to a certain location, to a cubicle, to a desk. It really makes sense to just open up the world and the workforce, and it creates opportunities, it takes people off the road, commute times, the cost of housing, gas prices, the environmental concerns -- there’s a whole host of issues that really are addressed by freeing people to be able to work from anywhere, and to really think of work more in terms of your work product, and that’s really what work is about, and I think that is the direction that we’re headed.
Nolo: Diana, thanks so much for being with us today.
Diana Fitzpatrick: Thank you.
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