Archive-name: contract-jobs/faq Version: 1.05 (June 1993) Last-Modified: Mon May 31 23:36:42 EDT 1993 This periodic posting summarizes some of the past discussion in misc.jobs.contract. A companion posting, "Welcome to misc.jobs.contract" , 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: What organizations deal with computer contract work? Subject: What magazines deal with computer contract work? Subject: What books deal with 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.] [Further note: as of 06/01/93, I've issued a formal RFD (Request For Discussion) to ascertain interest in just this split]. ------------------------------ 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. Akkana adds: One other item which many people overlook is that a contractor needs to be someone who likes change and adapts quickly -- I've seen people try contracting and fail miserably because their learning curves weren't steep enough or they took too long to get settled in at a new company, even though they may be technically very good once they get settled. (Conversely, I've seen long-time contractors accept a permanent job and get restless after six months and go back to contracting.) To me, this is one of the biggest draws of contracting, but I'd hate to see someone take the plunge and fail because they didn't think about the constant- change aspect. ------------------------------ 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" , 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 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 Pete Holzmann . It is put out by 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. If you've got the stomach for it, there are numerous publications from the Internal Revenue Service that go into great detail. Depending on where you are, you ask for them from the Western Area Distribution Center (Racncho Cordova, CA 95743-0001), Central Area Distribution Center (Box 8903, Bloomington, IL 81702-8903), or Eastern Area Distribution Center (Box 85074, Richmond, VA, 23261-5074). Of particular interest are Publication 334 "Tax Guide For Small Business", Publication 505 "Tax Withholding and Estimated Tax", Publication 533 "Self-Employment Tax", and Publication 937, "Employment Taxes and Information Returns" (including the section "Who Are Employees"). ------------------------------ 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 [see below]. There is also a CONSULT forum on Fidonet [details please? -- mcl.] [There are bound to be other such resources -- please email me -- mcl]. Other sources of information include organizations, magazines, and books. ------------------------------ Subject: What organizations deal with computer contract work? There is a group that works specifically with this clientele, the Independent Computer Consultants Organization, 1-800-GET-ICCA. In addition to yearly meetings, they publish an informative newsletter. Also, the IEEE Consultants' Networks are a "grass roots" effort of IEEE consultants who organize to help each other to become better consultants and to market their services. As of November 1992, there were CNs established in Long Island (the longest-established one), New York State, Boston, Connecticut, Washington (D.C.), Philadelphia, New Jersey, Los Angeles, Florida, and San Diego. Each CN has a referral service. In addition, calls requesting consulting services are coming into the IEEE Washington office, and an interim procedure has been set up to respond to them. A study is underway to define a longer term solution for a national referral service. The Washington office is making mailings to the CN's regarding tax issues, particularly Section 1706 of the Tax Reform Act of 1986. The PPTF (IEEE Private Practitioners Task Force) has formed a committee aimed at the repeal of the law. There is also a Coalition to Repeal Section 1706. They can be contacted through email through Jay C. Bowden , or via snail- mail at 1250 Connecticut Avenue, N.W., Suite 700, Washington, D.C. 20036. ------------------------------ Subject: What magazines deal with computer contract work? 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 +1 206 823 2222 fax +1 206 821 0942 Technical Employment News (formerly PD News) Publications & Communications, Inc. P.O. Box 399 Cedar Park, TX, USA 78613 phone +1 800 678 9724 or +1 512 331 3918 fax +1 512 331 3900 NTES Hot Flash published by National Technical Employment Services P.O. Box 217 Scottsboro, Alabama, USA 35768 phone +1 205 259 1828 fax +1 205 574 2079 [There are bound to be others. As above, email me and I'll include them in future editions of this message.] ------------------------------ Subject: What books deal with computer contract work? [Does anyone else have good recommendations for the bookshelf? -- mcl.] Netters Dale Ollila and Robert G. Renes have written a book that is called "Independent Contracting -- A Primer", which seems to be a good self-help book. Chapter titles are: Introduction; Examine Your Situation; Preparation; Establishing Yourself as a Business; Marketing Yourself and Your Services; Accounting Practices; If Things Go Wrong; Tax Laws; Bibliography; Index. It goes into much more detail than this FAQ can. From their introductory material: After the introductory material in the first chapter, Chapter 2 presents a comprehensive examination designed to allow the reader to determine his/her likelihood of success as an independent contractor. While no one can guarantee that one person will be successful while another will fail, the test and evaluation process in Chapter 2 gives an objective reader a way of determining their own chances. As long-time contractors ourselves, we feel it is very important that anyone thinking about this career know and evaluate all factors that bear on this career field. Contact Eagle Press at the following address: Independent Contracting c/o Eagle Press, Ltd. P.O. Box 303 Noti, Oregon 97461 ------------------------------ Subject: Contributions to this posting. I would like to thank the following people, who have contributed to, or helped revise, this posting: Akkana Robert Blythe Jay C. Bowden Stan Brown Pete Holzmann Dale Ollila Chip Rosenthal Arthur Rubin [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. I have received a review copy of the Renes and Ollila book.] This posting, like much of Usenet, is maintained on a purely volunteer basis. It is subject to comment and improvement by sending email to linimon@nominil.lonesome.com. -- Mark Linimon / Lonesome Dove Computing Services / Roanoke, Virginia {chinacat,uunet}!nominil!linimon || linimon@nominil.lonesome.com "It's a small town, son, may I ask what you're doing here?" I am coming to believe that Netnews is the digital equivalent of junk food...