Re: [PLUG] [OT] Career opportunities

[John Von Essen <john@essenz.com>]

If you are self-employeed/contractor, there are two things to think about.

1. Possibly getting O&E business insurance ($1 million policy for
software contractor will run you about $400). In the old days, consulting
firms required their independent contractors to obtain this. Nowadays,
they do it for you, and pay you on W-2 wages, NOT 1099.

2. If you are being paid on 1099, in addition to above insurance, there is
an easy way to get out of paying social security tax. Become incorporated.
This provides alot of good features, main one being that your assets
cannot be used when you are sued, etc.,. In PA, you can form an S-Corp for
about $400. The 1099 payments go to your Corporation, and your corporation
pays "you" a W-2 salary. This way, "you" only pay the same tax you would
if you were employeed by any other company. Since you are currently the
only employee, you have 95% of company profit go to you as a salary. Of
that remaining 5%, your corporation files a tax return, and you only pay
social security on that small 5%.

This is why tax laws favor businesses and not individuals. So if you stand
to lose more then $400 via social security tax, then incorporated. And if
you intend to seriously persue the business, it will be better in the long
run.

-John

On Wed, 7 Dec 2005, sean finney wrote:

> hi mike, chris,
>
> having recently been through the self-employment game, i thought
> i'd throw something in here:
>
> On Wed, Dec 07, 2005 at 11:58:18AM -0500, Mike Ciul wrote:
> > When I talked to other computer workers, they seemed unsurprised - but
> > after my wife looked into the situation, this appears to be illegal -
> > contractors are supposed to advertise and the clients are supposed to
> > come to them. They are paid by the job, not by the hour.
>
> i think such a practice is becoming more and more common-place,
> and in this case i would call it unquestionably sketchy motives.
>
> there are also circumstances where it's not such a bad thing.  from
> my experiece, here are some things to keep an eye out for as the
> self-employed/independant contractor:
>
> - whenever possible, you should set the rate.
>   rate, not wage.  the rate should include not only what you feel you
>   should be paid, but also expected overhead from what "the man" will
>   want from your 1099-misc, accounting costs, etc.  if you do not
>   set the rate, and it doesn't iyho include such costs, walk away and
>   save yourself the pain.
>
> - the task should be finite in duration and scope in most cases.
>   this isn't set in stone, as you may find an agreeable ongoing
>   relationship..  but i would definitely be wary of doing so for new
>   clients.
>
> - how are others at the organization (especially those doing similar
>   tasks, if they exist) paid/hired?
> - how do similar organizations pay/hire for similar positions?
>
> - who's calling the shots?
>   do you have a "boss", or are you your own boss, and "providing services"
>   for a client?  a good example:  you are probably not your plumber's
>   boss.  if you had a secretary, you would be your secretary's boss.
>
> > I have a feeling a lot of people are getting screwed this way. Before
> > you consider self employment, I would suggest seriously considering the
> > costs and the risks.
>
> and factor them into the rates :)
>
>
> seriously though... i don't know how long ago this was, but you might
> want to consider your options if you haven't paid taxes on that income
> yet.  you can complain to the government that you should have been paid
> as an employee (w2/w4 with ss etc paid by employer, instead of 1099-misc),
> and you have a good chance that your former employer will be expected to
> pay the costs related to ss/medicare/etc.  this doesn't come from direct
> experience, but from scary stories given to me by my company's accountant.
>
> but ianal, and ia definitely n an accountant :)
>
> 	sean
>
___________________________________________________________________________
Philadelphia Linux Users Group         --        http://www.phillylinux.org
Announcements - http://lists.phillylinux.org/mailman/listinfo/plug-announce
General Discussion  --   http://lists.phillylinux.org/mailman/listinfo/plug