Re: Contracting

[Chuck Martin <cmartin -at- SEEKERSOFT -dot- COM>]

It is highly unfair to lay blame in such situations solely on the IRS and
unions. Unions, while often getting too greedy for hteir own good in many
situations in recent decades, countered a longstanding practice of
companies taking advantage of and abusing their workers. The IRS is in a
no-win situation--look at the current hearing--because so many people have
schemed to aviod paying part or all of their income taxes over the years. A
significant percentage of these people were people who claimed to be
running their own business, frequently from their own homes, and then
taking exorbitant deductions, outrageous expenses, and evn making false
claims.

However, recruiters and brokers who claim that they are trying to place
just full-time employees aree feeding you a load of BS themselves. A good
broker works for you, the writer, trying to meet your needs.

It is true that IRS rules make independent contracting somewhat difficlut,
but certainly not impossible. Many recruiters in this area have simply
offered the option of making you their employee--an option that I have used
abd found particularly appealing. The advantages of this situation include:

- no self-employment tax
- recruiter takes care of all withholdings
- recruiter often offers rudimentary benefits (mine offers a 401(k))
- you still get contractor rates
- recruiter takes care of billing the client
- you get regular paychecks (from the recruiter, no need to wait for the
client to pay their bills)

In my case, I sacrifices a couple of dollars an hour to take thisoption,
which I thought was well worth avoiding the time and cost needed to manage
all the peperwork of "my own business."

Bottom line though: the IRS would not have had to come up with such
stringent rules for independent contractors of those people themselves did
not work so hard to avoid paying their fair share of taxes. You cannot
blame the IRS for reacting to the dishonesty of so many U.S. citizens.

If a recruiter tells you that you need to be incorporated, etc., to get a
contract, find another recruiter. In this area, clients often place jobs
with more than one recruiter, so it's not too hard to find a recruiter that
can meed your needs and get you the good jobs or contracts.

Just an FYI: I primarily use Andrew Davis here in the Bay Area, who has his
own company, Synergistech Communications. He specializes in only technical
communicators, having been one himself. He's at www.synergistech.com if
anyone wants to check him out.


At 11:27 AM 9/29/97 -0500, you wrote:
>CWells wrote:
>
>
>>I want to continue working independently and ideally out of my home >office;
>>however, if the project seems interesting I'll go back corporate >America.
>>Recruiters tell me they only place W2 contractors and there's no way I >can
>>work at home. They say I need to be incorporated, pay workman's
>compensation,
>>and general liability insurance. This can get very expensive!
>
>>Can anybody give me information on how they handle these issues?
>>Do I really need all this stuff or are recruiters just trying to get an
>>employee?
>
>You can thank the IRS, trade unions, and the courts for your situation.
>As a recruiting company, we would rather have everybody on 1099s--the
>paperwork is easier and we don't have to pay taxes; but the IRS and
>labor unions would rather have you as an employee. The rules are slanted
>in such a way as to make it very risky for any company to use
>independent contractors.
>
>The IRS's motivation is fairly straightforward--employees have money
>withheld for taxes. Most employees only consider take home pay as "real"
>money. But 1099 independent contractors get all their compensation paid
>directly to them and then have to write a check to pay taxes. For some
>strange reason, once people have the money in their hands, it seems more
>real, so most peoeple try to hold onto as much as possible of it. The
>rsult is that the IRS gets less.
>
>Labor unions originally opposed independent contractors because of
>"piecework" abuses in some manufacturing businesses. Now they still
>oppose independent contractors even though many make far more than union
>labor makes. Why? Independents are harder to organize--at least that's
>my theory.
>
>The courts have made recent rulings in favor of independent contractors
>who ex post facto demand benefits such as profit sharing from companies.
>Microsoft is the most famous recent case. Therefore, many companies are
>afraid to use independents because courts may invalidate any contracts
>they make with independents.
>
>I believe you can get a copy of the IRS's guidelines regarding
>independent contractors on their Web site. Most contractors I know who
>are trying to maintain independent status do the following:
>
>* incorporate (no longer fall under 1099 regulations)
>* juggle two or three clients at once
>* refuse to work on site or on set business hours
>* take some fixed bids
>* get Worker Comp insurance (a few hundred dollars a year)
>* get liability insurance ( more expensive)
>* have a special contract they provide clients that spells out the
>relationship in detail and specifically waives benefits
>* take on subcontractors
>* regularly promote their business
>* have their own equipment
>
>STC local chapters often have SIGs of independent contractors (Chicago
>has one). You can get more information from them.
>
>One last thing. Even if you incorporate and do other thing to ensure
>your independent status, most companies will still not use you for
>long-term, on-site, hourly projects because these project violate
>several guidelines for independents--degree of control, inability to
>lose money, use of client equipment.
>
>As a former independent, I wish you luck.
>
>David Orr
>Orr & Associates
>
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--
"You don't look American"
"Everyone looks American, because Americans are from everywhere"
                                            - Doonesbury
Chuck Martin
Technical Writer, Seeker Software, Inc      | Personal
cmartin -at- seekersoft -dot- com                      | writer -at- grin -dot- net
www.seekersoft.com                          | www.grin.net/~writer

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