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Monday, July 1, 1996

          Wendelyn Martz has lived on both sides of the mommy wars. An urban planner in Upper Marlboro, Maryland, she had always intended to pursue her career. She took a leave of three months after the birth of her son; five weeks after her daughter was born, she raced back to work to finish a high-profile project.

          Slowly she began to burn out. Her husband was working long hours, so all the duties at home landed upon her shoulders. Something had to give. "I thought, 'This is not right. I'm cheating someone and I'm probably cheating everyone,' " she says. "I needed to be home." Finally she resigned.

          Nevertheless, she loved her work and wanted to continue her professional interests. "I need work outside of my family," she says. "My whole world cannot be successfully reduced to just taking care of my children. I'm trying to find that middle ground."

          A few years ago, Martz and a partner started a home-based business designing and marketing greeting cards. Sales took off, her husband began providing his marketing expertise, and today her Pathway Art can be found in every corner of the country, from the Borders Books chain to the John F. Kennedy Center for the Performing Arts, in Washington, D.C. Her son, age six, even helps assemble orders and offers editorial comment on new designs.

          Martz's story is becoming increasingly familiar. A growing number of career women are leaving established companies to start their own. Aided by the tools of the Information Revolution--computers, modems, and fax machine--many women with young children are becoming entrepreneurs by establishing home-based businesses.

          According to the National Foundation for Women Business Owners, U.S. women own 3.5 million home-based businesses. Additionally, they provide full-time or part-time employment for an estimated 14 million people. Martz and her peers are joining an impressive group: Mrs. Field's Cookies, Esté Lauder Cosmetics, Lane Bryant, Stairmaster, even Steinway pianos, all started as home-based businesses. Kim Hackett, the executive director of the Women's Home Business Network, says that information and computer-based businesses such as desktop publishing, graphic design, free-lance writing, and consulting are among the most successful such businesses. But women are finding that their skills as lawyers, accountants, real-estate agents, and public-relations professionals also translate well to businesses based at home.

          What's driving this wave of women entrepreneurs? For the first time in our history, the majority of babies less than a year old have mothers in the paid work force. In fact, the fastest-growing segment of mothers in the work force are precisely the ones with the greatest child-care responsibilities--those with children under six years of age. Since 1960, these mothers have tripled their work force participation.

          The efforts of women to juggle babies and briefcases exact a stiff price: A recent issue of Parents magazine concluded that, among mothers, "emotional conflict is epidemic." In a startling reader survey of 18,000 women, the magazine discovered that only 4 percent of respondents would choose full-time employment if they could do "whatever they wished."

          What do women really want? Most want flexibility: 61 percent of the women said they would choose part-time work if they could. Similarly, a 1995 poll of 3,000 women done by Roper Starch found that 43 percent of employed women with children would prefer to stay home. Another poll found that 87 percent of women want to spend more time caring for their children.

          Meanwhile, the discussion of women and workplace issues in the women's movement and in the public-policy realm remains focused on the "glass ceiling." Women call for flexibility in employment and more time with their children while the public debate centers on day care. Even the Republican-dominated National Governors' Association favors more federal spending on day care.

          But the real working woman appears to be voting with her feet. According to Fortune magazine, "The generation of women that blazed new trails into the corporate suites is, evidently, blazing its own trails out." In 1995, Fortune surveyed three hundred executive women and found that 87 percent said they had made or were considering making a major change in their lives.

          Home-grown entrepreneurship offers many women a way to honor their commitment to family while pursuing professional challenges. This entrepreneurial spirit has allowed some women to regain control of their lives; home-based work supplies the flexibility missing in the formal workplace. Technology and the economic dynamism of the 21st century will make home businesses a more attractive option for millions of American women.

The Taxman Cometh

          Public policy threatens to stifle the vigor and creativity of the small home-based entrepreneur. "Consider the tax code," says Dianne Floyd Sutton, of the National Association for the Self-Employed. "It stands like King Canute, commanding the waves of modernization to recede."

          The IRS greets the home-based worker with downright hostility and discrimination. Start with the home-office deduction. At the first national conference on home-based business, in 1994, an IRS representative commented in a workshop that "everyone who took a home-office deduction in 1993 is red-flagged for an audit." Here's the problem: To deduct the expenses of a home office, tax expert J.K. Lasser explains, you "must be able to prove that you use the home area exclusively and on a regular basis" for one of two reasons--either as a place of business to meet with customers in the normal course of your business, or as your "principal place of business."

          The IRS interpretation of this law has been exceptionally stringent. Lasser points out that one woman who ran a roadside stand selling home-prepared items a mile from her home was not allowed to deduct her home-office expenses, because the IRS ruled that the stand was her principal place of business. In a similar case, a challenge to that interpretation reached the U.S. Supreme Court. In 1993, the Court ruled that a deduction is not allowable when the home office is used only for administrative purposes and not for seeing customers.

          This ruling hits women especially hard. In a hearing before the Small Business Committee of the U.S. House of Representatives, Beverley Williams, the president of the American Association of Home-Based Businesses, testified that not allowing deductions for business owners who conduct business outside their home offices raises a safety issue. "Many women choose . . . to not receive their clients who are strangers into their homes," Williams said. "They should not be asked to compromise their safety or perception of safety for the sake of business deductions that other small businesses enjoy."

          Other legal minutiae can bog down home-grown businesses:

  • The "exclusive use" clause raises a hurdle for people caring for dependents, such as mothers with young children. An IRS auditor who found a diaper-changing table in a home office, for example, might disallow the deduction.
  • Home-based businesses are caught between local zoning laws and IRS rules. Zoning laws sometimes preclude home-based business owners from meeting clients in their offices, thereby jeopardizing their deductions. But business owners who rent offices outside their home have no difficulty deducting these office expenses, even if they, too, always meet clients elsewhere. What justifies the disparity?
  • IRS rules are murky in defining when a home-based business can claim "independent contractor" status. Senator Don Nickles of Oklahoma laments, "This distinction is determined by an arbitrary 20-part Internal Revenue Service common-law test. This inconsistent method has been the bane of small business owners who often face bankrupting penalties and taxation despite good-faith efforts to properly classify employees for tax purposes."

              Over the last seven years, the IRS has reclassified 439,000 independent contractors as employees and collected more than $750 million in fines. Nickles and Senator Christopher Bond of Missouri have introduced the Independent Contractor Simplification Act of 1996 to reform tax rules in favor of home businesses. Representative Jon Christensen, a Republican from Nebraska, has introduced a similar bill in the House, collecting more than 200 cosponsors.

  • Health-insurance costs are only partially deductible for home businesses. Author Paul Edwards, an expert in home-based businesses, points out that corporations may deduct 100 percent of health-care costs for their employees. Moreover, the health-care benefits are not counted as taxable income for the employees. But home-based firms can deduct only 30 percent of their health-care costs. President Clinton recently signed a bill increasing this deduction by 5 percent a year--but the increase will top out at 50 percent, maintaining the bias against home-based businesses.

Resources

          The National Foundation for Women Business Owners (NFWBO). A clearinghouse for information on women-owned businesses; publishes a newsletter on women's business issues, conducts seminars, issues research reports, and facilitates networking. Contact Sharon G. Hadary, the executive director, or Julie R. Weeks, the director of research, at 1100 Wayne Avenue, Suite 830, Silver Spring, Md. 20910-5603. Tel.: 301-495-4975, fax: 301-495-4979, e-mail: %2073564.3214 [at] compuserve.com.

          American Woman's Economic Development Corp. (AWED). A membership organization that provides training programs, networking seminars, business counseling, and technical assistance for women in business. Write to 71 Vanderbilt Avenue, Suite 320, New York, N.Y. 10169. Tel.: 1-800-222-AWED.

          American Association of Home-Based Businesses. A membership organization supporting home-based businesses across the nation. Offers discounted long-distance service, legal services, and travel, and serves as a public-policy advocate in Washington. Contact Beverley Williams, the president and founder, at P.O. Box 10023, Rockville, Md. 20849-0023. Tel.: 1-800-447-9710, fax: 301-963-7042, Internet: http://www.aahbb.org

          National Association for the Self-Employed. A membership organization with great information, an excellent newsletter, and aggressive advocacy on Capitol Hill. Contact Jim Morrison at 1023 15th Street N.W., Suite 1200, Washington, D.C. 20005. Tel.: 202-466-2100.

          Working From Home: Everything You Need to Know About Living and Working Under the Same Roof, by Paul and Sarah Edwards (Tarcher/Putnam). This book has everything from the intricacies of zoning regulations to avoiding the siren song of the refrigerator. The authors also manage an interactive, on-line forum called "Working From Home" on CompuServe (under the "Professional" icon); America Online also has a forum (under the "Clubs and Interests" icon).

Charmaine Crouse Yoest is a contributing editor of Policy Review: The Journal of American Citizenship and the co-author of Mother in the Middle: Searching for Peace in the Mommy Wars (HarperCollins/Zondervan).

Making a Home Business Work

1. Keep regular hours. First, your own productivity will benefit from maintaining structure in your life. Second, it helps if your customers, clients, and colleagues know when they can regularly reach you. (And third: some people will need to limit their work.)

2. Hire a baby sitter. Main benefit to being home: being with your kids. Big obstacle to productivity: being with your kids. It can be done without a baby sitter and, after all, the point is to see them more than you would working away from home. But most people should plan to use some kind of baby-sitting. A home-based career offers lots of creative opportunities: Some moms have arranged baby-sitting co-ops in their communities. Many churches have pre-school or "mom's mornings out" programs.

3. Be professional. There's nothing like trading the perks of an office and an expense account for baby spit-up and dirty dishes to undermine a professional attitude. And our society sends not-so-subtle messages that moms and home are not cutting edge. Don't buy it. A professional image is critical and begins with inner confidence. Authors Paul and Sarah Edwards say that "being taken seriously" is the one of biggest challenges for home-based workers. The antidote is careful professionalism.

4. Network, network, network. Other challenges for the home-based worker are marketing, becoming out-of-touch, and personal isolation. These are disparate problems; the answer to all three is the same: use networking to help identify your home-based business or job . . . and then don't stop. Keep in touch with former colleagues. Drop notes. Do lunch. One mother who downshifted her career began giving dinner parties to maintain contacts; she's still in the loop and in demand.

5. Measure twice, cut once. One size does not fit all when it comes to work/family arrangements. Home-based businesses are not for everyone: it's wise to "count the cost" before beginning. Run with your talents, and recognize your limit ations; if you are a people person who needs structure, a home-based situation might not be for you. And, although professions such as desktop publishing are suited to home-based operations, others are not.

It is tempting to whitewash the sacrifices involved in switching gears in your career, but there are no easy answers to the work/family dilemma. Facing that reality squarely raises your chances of success by allowing you to focus on the rich rewards of working at home, rather than on the opportunities left behind.

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