On the other side, self-employed workers can take far more deductions than an ordinary employee. Anytime a self-employed worker visits a client, the trip expenses are deductible (the deduction for driving any car is $0.385 per mile plus any tolls incurred). Other expenses such as uniforms, computer equipment, cell phones, etc. can be deducted if there is a legitimate business use for these items. Since the chances of being audited by the Internal Revenue Service are relatively slim, many self-employed workers likely overstate their deductions. One deduction that has a reputation for raising a "red flag" at the IRS is the deduction for a home office. Many people would simply put a desk in an attic, perhaps with an old computer on it, and try to take a deduction (for depreciation). Home office deductions are legitimate, although it has to be a legitimate office. The IRS will also overrule other flagrant deductions, such as buying a Yacht and naming it after your company, painting the name on the side and calling it an advertising expense. If you're an accountant or dentist, such a deduction likely won't be valid.

If someone is self-employed, but works for only one client, and is otherwise indistinguishable from a regular employee, then the IRS will probably require the company to treat him as a regular employee.