I'm being offered a position that is a short term contract. 1099 position and I need 4 different types of insurance, etc.

This is something totally new for me as I've only ever been a W2 employee. I could use some advice for a short duration effort (3 months)

^^^^^^^^^^^^^
I am self employed. Have an attorney read the contract. Keep careful records of your expenses and the money coming in. You will pay ALL social security taxes.
If the contract is long enough hire a CPA. You do not want trouble with the IRS.

quote:

Originally posted by ZSMICHAEL:
^^^^^^^^^^^^^
I am self employed. Have an attorney read the contract. Keep careful records of your expenses and the money coming in. You will pay ALL social security taxes.
If the contract is long enough hire a CPA. You do not want trouble with the IRS.

This. You may want to grab a EIN# and set up a corp so you can pay yourself out of the corp as an employee of the corp. Versus doing 1099 under your social.

Don't shortchange yourself on your rates. There is a reason employers bill out their employees at 2-3x their base salary hourly rates. (Hint: It's not because they are making money hand-over-fist.)

My rough math internally is we have about a %20 burden for taxes, unemployment insurances, etc.

So if your typical rate is $50./hr W2 for example. I wouldn't do it for any less than $60./hr 1099- Corp 2 Corp. That's just a break even point. Probably not including your Insurances you'll need to come out of pocket for.

Also check the billing / payment terms. Sometimes people will try to get away with Net 90 days or some other ridiculous payment terms.

What type of work is it?

Are you going direct or through a Staffing Co?

Do you intend to continue doing independent work or will you go back to W-2?

Do you intend to grow your contract into a services company with employees?

You can go in lots of directions. But I'm a one-man shop. I written/read a lot of contracts in my past so I'm comfortable without a lawyer for the type of work I do. YMMV. If you're going through a staffing co, they'll cover most of that. Just make sure you understand the contract they give you, it'll be straight fwd.

My work is all computer-based and 99% remote. I have an LLC. An s-corp isn't necessary when you're a 1-man shop unless you want all the headache that goes with an s-corp.

I use quickbooks online but there are good, cheaper (free) options like zoho.

I use Hiscox to get my insurance.

Hope this helps.

quote:

Originally posted by myrottiety:
My rough math internally is we have about a %20 burden for taxes, unemployment insurances, etc.

That number is for direct compensation. It probably doesn't have things like holidays, vacation, etc. baked into it. Also, as this is a "short term contract", that number definitely doesn't have the amount of time it takes him to find another contract baked into it, which wouldn't be there if it were a long term contract or a "real job".

I'm certainly not saying don't do it. Just understand the total cost. It's likely more than you think.

Mail, you have!

quote:

Originally posted by IntrepidTraveler:
Don't shortchange yourself on your rates. There is a reason employers bill out their employees at 2-3x their base salary hourly rates. (Hint: It's not because they are making money hand-over-fist.)

This! Take the highest rate you would expect to earn as an employee, or alternatively, what you would like to earn, and triple it, then round up to the next $50/hr. You will still be costing the company less than a hired W-2 employee would cost them. For example, if your position would nominally pay say, $90K/year, (90,000/2080 * 3 == 129.80/hr, round up to $150/hr. for your charging rate.) This is for full-time work, if they restrict hours on you, up the rate as you see fit.

It may sound like a lot of money, but it also gives credibility, and shows confidence. If they are re-billing you to their clients, it ups their revenue as well.

Most likely you know this but always remember that the amount of Social Security and Medicare taxes you pay will double for self employment. It appears that you are not liable for payments to the state’s worker’s compensation or unemployment funds as you would not qualify for those.

You mentioned you need 4 different types of insurance.

Some insurances like E&O (Errors & Omissions) and Cybersecurity can be very expensive. Make sure you get quotes for all of them and factor that into your rate.

Depending on what you are doing - some of the required insurances may not be applicable and you can get them to strike them from the contract.

Thanks for all of the advice everyone, and to those who reached out. A lot to consider for sure.

I'm self-employed DBA, partialy remote. I might be a bit late to the discussion, but I would strongly suggest creating an S-corp (mine) or LLC. My contract requires 2 types of insurance: my general business policy, and a liability policy. I pay myself bi-weekly and get W-2. An accountant can give you advice on compensation rate or go about 1/2 what you bill. Quickbooks was good until they went online/subscription only. Not sure what to use now. I know you mentioned short term, but push as much money into a retirement account as you can. I use a solo-401K. Remember to track all expenses (including traveling to contract site) so you get reimbursed from your company.

Yes, when I said short term I meant 3 months or less. No one will touch a 401K or 403C/B for that short a time span that I've talked to so far.

Architect is spot on assuming that the insurance you need is not exorbitant and it might be given the short duration.

As a common example, if you go into a car dealership to get some work done on your vehicle you’ll typically see them charge an hourly rate of $150 to $200/hour. The mechanic is lucky to make $30- $50/hr.

quote:

Originally posted by IntrepidTraveler:
Don't shortchange yourself on your rates. There is a reason employers bill out their employees at 2-3x their base salary hourly rates. (Hint: It's not because they are making money hand-over-fist.)

This in a big way. I do some 1099 work in retirement to keep busy and keep some $ flowing in. What looks great on the surface is quickly eaten up by taxes and other expenses.
I'm a firm believer that if 100% of workers had to pay quarterly taxes out of their bank accounts (no withholding like a 1099) there would be a tax revolt in about 1 quarter.