Internet Surfer 2.0/Internet Surfer 2.0 (Wayzata Technology) (1996).iso/pc/textfile/faqs/contract/faq

Internet Message Format | 1992-12-26 | 11.2 KB

Xref: bloom-picayune.mit.edu misc.jobs.contract:7316 news.answers:4782
Path: bloom-picayune.mit.edu!enterpoop.mit.edu!hri.com!spool.mu.edu!wupost!cs.utexas.edu!chinacat!nominil!linimon
From: [e-mail] (Mark Linimon)
Newsgroups: misc.jobs.contract,news.answers
Subject: Misc.jobs.contract: Frequently Asked Questions (FAQs)
Summary: frequently asked questions about contract jobs on Usenet
Message-ID: <[e-mail]>
Date: 24 Dec 92 08:10:15 GMT
Expires: Thu, 4 Feb 1993 08:09:48 GMT
References: <[e-mail]>
Reply-To: [e-mail]
Followup-To: poster
Organization: Lonesome Dove Computing Services
Lines: 262
Approved: [e-mail]
Supersedes: <[e-mail]>

Archive-name: contract-jobs/faq
Version: 1.03
Last-Modified: Thu Dec 10 23:59:45 EST 1992

This periodic posting summarizes some of the past discussion in
misc.jobs.contract.  A companion posting, "Welcome to misc.jobs.contract"
<[e-mail]>, serves as an introduction
to the group for new readers.

Misc.jobs.contract is a Usenet newsgroup created to foster exchange of
information about employment on a contract basis, as opposed to employment
on a full-time basis.  Postings specifically addressing full-time employment
should instead be directed to misc.jobs.misc.

Although the group is not _specifically_ dedicated to computer-related
contract work, most of the discussion in the group has related to it.

Please see also the Frequently Asked Question (FAQ) periodic postings
in misc.jobs.misc, misc.jobs.offered, and misc.jobs.resumes, for further
information about the various misc.jobs groups.

------------------------------

Subject: Table of Contents

    Subject: What's the charter of misc.jobs.contract?
    Subject: Is there an archive site for misc.jobs.contract?
    Subject: Should I consider contract work?
    Subject: Don't contract workers make a lot of money?
    Subject: What is telecommuting?
    Subject: What is a job shop?
    Subject: What is Section 1706?
    Subject: What are the tax implications of contract work?
    Subject: Are there other guides for tax questions?
    Subject: Should I incorporate?
    Subject: How can I learn more about computer contract work?
    Subject: Contributions to this posting.

------------------------------

Subject: What's the charter of misc.jobs.contract?

When originally chartered, it was for postings of contract jobs available,
contract jobs offered, and discussion of contracting in all its forms.
At the time it was felt that one group would be sufficient, and if
traffic mandated, it could later be subdivided along the lines of
misc.jobs.contract.[offered,resumes,misc], to mirror the upper-level
groups.  [This latter was never official, and from my own anecdotal
recollection -- mcl].

------------------------------

Subject: Is there an archive site for misc.jobs.contract?

Not that I'm aware of.

------------------------------

Subject: Should I consider contract work?

Contract work appeals to a certain type of individual.  Although it's
somewhat risky to generalize, the most important traits would include:
being a self-motivated individual; willingness to trade personal security
for risk; dealing well with people; and technical ability.  You may well
find that the first three issues are more important to success than the
latter.

You should seriously consider getting advice from a qualified CPA and a
qualified lawyer _before_ making the move.  The issues involved are
complex, the risks significant, and advice you get on the net (while
some of it is excellent) should be taken with a grain of salt.  This
explicitly includes this posting.

------------------------------

Subject: Don't contract workers make a lot of money?

Yes, but the expenses are much higher.  An oft-quoted rule of thumb is
that one should make about 2x the amount one would expect as a full-time
employee, just to break even.  Factors such as the self- employment tax,
paying for one's own medical expenses, equipment, sick time, vacations,
and time between jobs consume the difference.

You may encounter resentment from some full-time employees who under-
estimate the value of these things as well as other intangibles, such
as the (very real) risk of not being paid.

------------------------------

Subject: What is telecommuting?

This is an arrangment with a company where one maintains equipment at
one's own residence or office and works remotely, by modem.  Tele-
commuting is not widespead as of yet but may be on the increase.  Both
contract work and full-time work have been known to be done this way.
As above, intangibles such as one's personal relationship with the
company and communications skills with others take on a much more
important role than one might expect.

------------------------------

Subject: What is a job shop?

A job shop is a company that hires employees who are themselves on either
a contract basis or full-time basis, and contracts them out to other
companies.  Some operate merely as referral services, who get a cut of
the employees' hourly rate; some have such amenities as sick time,
vacations, and 401k plans; most fall somewhere in between.  Before you
go to work at a job shop as a contract employee (as compared to full-
time employee), be prepared to consult a CPA or attorney about the
implications of Section 1706.

------------------------------

Subject: What is Section 1706?

This is a section of the U.S. tax code that makes it difficult for
anyone receving employment through a job shop to be considered as a
contract worker.  Instead it presumes that such individuals are full-
time employees unless a set of criteria are met.  A companion posting
to this one, "Misc.jobs.contract: Text of IRS Section 1706"
<[e-mail]>, contains the entire text.

------------------------------

Subject: What are the tax implications of contract work?

Some brief guidelines for taxes in the United States are presented in
the following paragraphs.  Again, it is mandatory that you get advice
from a qualified CPA or tax practitioner, of which your current humble
Poster is neither.

The general concepts of tax for small business are explained in Internal
Revenue Service Publication 334, "Tax Guide for Small Business".

As a self-employed person, you will need to file estimated taxes.
The concept of estimated tax is explained in IRS publication 505,
"Tax Withholding and Estimated Tax".  You will need to file estimated
taxes on form 1040-ES every quarter to avoid incurring hefty penalties.

If you are self-employed, each client will send you a Form 1099 at the
end of the year, not a Form W-2.

If you are self-employed, you pay double FICA (Social Security) tax,
currently 15.3%.  This is paid with your estimated taxes and on your
regular form 1040.

If you are self-employed, you will possibly also want an Employer ID
Number to give your clients, rather than your own Social Security Number;
the EIN is assigned by the IRS when you apply on form SS-4 (available
from the IRS, not the Social Security Administration).  Using an EIN
rather than your SS is apparently only a _necessity_ in certain cases.

Arthur L. Rubin ([e-mail]) clarifies:

    You only need an EIN (and state ID number) if you have employees,
    have a "qualified retirement plan", or want to qualify for certain
    other tax credits, which I would think most consultants wouldn't be
    able to qualify for anyway.

    If you incorporate or form a consulting partnership (I don't see any
    advantage to a partnership, but it is legal), you need an EIN.

IRS forms and publications are available free by calling 1-800-TAX-FORM.
Service is normally pretty prompt: one to two weeks.

Also, check with the Secretary of State of your home state.  You may
have to pay worker's compensation or unemployment taxes, and possibly
obtain other business licenses and permits.

------------------------------

Subject: Are there other guides for tax questions?

There is a tax guide for just about all engineering tax questions,
recommended by [e-mail] (Pete Holzmann).  It is put out by a
non-profit organization (Academic Information Service, PO Box 400,
Greenbelt MD 20770) and is called "Tax Guide for Engineers".   Here's
a few key aspects of this annual guide:

    If it doesn't save you at least $200 in taxes, you're welcome to
        ask for your $$$ back ($24.95 list).
    It is specifically oriented towards technical professionals who
    may or may not have a side business.
    They actually research tax court cases to find out what the courts
        think, rather than just what the IRS says.
    They provide a really good framework for filling out taxes that
        tends to minimize audits.

------------------------------

Subject: Should I incorporate?

Again, as above, the best thing you can do is to get advice from a
qualified CPA and a qualified lawyer.

Opinions are divided on this issue: Some consultants believe incorporation
is a waste of time and money; others believe it is necessary.  Opinions
also vary as to whether incorporation protects you from Section 1706
(see below).

------------------------------

Subject: How can I learn more about computer contract work?

This newsgroup is only one source of information.  There is a moderated
SIG on Compuserve run by ICCA, the Independent Computer Consultants
Organization, 1-800-GET-ICCA, which also publishes a good newsletter.
There is also a CONSULT forum on Fidonet [details please? mcl].
[There are bound to be other such organizations -- please email me.]

Also, three magazines that deal mainly (but not exclusively) with listings
of jobs available through job shops are:

      CE [Contract Employment] Weekly
      C.E. Publications Inc.
      P.O. Box 97000
      Kirkland, WA, USA 98083-9700
      phone [phone]
      fax   [phone]

      Technical Employment News (formerly PD News)
      Publications & Communications, Inc.
      P.O. Box 399
      Cedar Park, TX, USA 78613
      phone [phone] or [phone]
      fax   [phone]

      NTES Hot Flash
      published by National Technical Employment Services
      P.O. Box 217
      Scottsboro, Alabama, USA 35768
      phone [phone]
      fax   [phone]

[There are bound to be others.  As above, email me and I'll include them
in future editions of this message.]

------------------------------

Subject: Contributions to this posting.

I would like to thank the following people, who have contributed to, or
helped revise, this posting:

    Robert Blythe ([e-mail])
    Stan Brown (abvax!iccgcc.DNET![e-mail])
    Pete Holzmann ([e-mail])
    Chip Rosenthal ([e-mail])
    Arthur Rubin ([e-mail])

[Obligatory disclaimers: I have no connection, other than subscriptions,
with the above magazines; however, I am an ICCA member.  I've made my best
effort to ensure all information is correct, but errors have been known to
occur.]

This posting is subject to comment and improvement by sending email to
[e-mail].
--
    Mark Linimon / Lonesome Dove Computing Services / Roanoke, Virginia
   {chinacat,uunet}!nominil!linimon   ||    [e-mail]
     "I keep my fingernails long, so they click when I play the piano."