Plan to freelance in future? What you should know

Freelance the right way
Freelance the right way   

There's a major workplace demographic shift in the making.

More than 53 million Americans are doing some sort of freelance work today, according to the Freelancers Union. And by 2020, many experts predict this group of independent workers will grow enough to make up half of the labor force.

"That's going change not only their life, but it's going change the way that Corporate America works," said small business expert and corporate consultant Michael Parrish DuDell.

Read MoreHow freelancers are fueling the new economy

Freelancing has many benefits: flexible hours; exposure to a variety of clients and projects; and the potential to make more income by taking on more work. But there's also more responsibility.

When you call the shots, you're not just responsible for managing your business. You're also responsible for managing other details that are equally important to your success, including your taxes, healthcare and retirement planning.

Taxes

Young man working from home
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As a freelancer you're responsible for paying your own taxes, and you will most likely be required to pay taxes quarterly, not just once a year on April 15. So get in the habit of setting aside a portion of every paycheck, based on your tax bracket, to go toward taxes to pay back Uncle Sam.

Read MoreThese missed tax breaks may be costing you

Healthcare

One of the biggest perks freelancers give up when working for themselves is health insurance coverage provided by an employer. Instead, you'll not only have to provide insurance to yourself, but maybe even to a staff if you employ one.

FreelancersUnion.org offers information on health plans. The website curates benefits for independent workersand lays out all of your insurance options, including healthcare, disability, and life insurance.

Retirement

Freelancers must also give up employer-sponsored retirement accounts. But there are several individual retirement account (IRA) options available to independent workers, including a SIMPLE IRA, SEP IRA and Solo 401(k), which all provide vehicles for saving a portion of your income in a tax-advantaged account. There's also the option of a Roth IRA for those with earned income under the IRS limits.

Business or Pleasure?

Keep your business and personal matters separate. You'll want to do this because business expenses will qualify for tax deductions.

A freelance columnist can deduct the cost of an internet connection, a computer, conferences they attend, writing suppliespens & paper, you name it. And if you work out of your home, you can deduct a home office (the percentage of your home that is used for work). Talk to an accountant to understand what deductions are allowable and what documentation you would need to provide.

A business checking account and credit card help you keep track of the money coming in and out of your freelance business, and helps you separate business expenditures with personal spending. Many banks and credit unions have special offers for small business checking, so take advantage of the rewards or perks that you might get.