Contracting in DFW

[David Orr <whitears -at- INTERACCESS -dot- COM>]

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

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