Tips For 1099 Contracting
SELF-EMPLOYMENT means you’re in charge of your time, but responsible for many additional tasks: prospecting for clients, preparing estimates, tracking expenses, calculating invoices and paying taxes quarterly. If your independence is worth the effort, contracting could be right for you.
BY DEFINITION, 1099 contractors are not employees of the businesses with which they work, but are suppliers of services. The term “1099” refers to the Internal Revenue Service (IRS) form that an independent contractor receives stating her income from a business during a specific tax year. Every one of your clients should send you a 1099 for the previous year in January.
- Limitations. The rules used by the IRS to define an independent contractor consider the degree of control and independence. In short, your clients “hire” your services, not you. They can state the results they expect for the rate you charge, but you supply the tools to do the work and decide how to proceed. Careful scrutiny of the rules could save you and your clients from any issues regarding your working relationship.
- Taxes. The earnings of a 1099 contractor are subject to self-employment tax as well as income tax and estimated federal and state taxes on net earnings are paid quarterly. Even if you are well-versed in taxation, it’s wise to seek advice from a lawyer or another specialist in this area before deciding whether to operate as a sole proprietorship or incorporate.
OPEN FOR BUSINESS. As a contractor, you are your own boss and to successfully launch your business, you have some decisions to make:
- Branding. Establish a look for your business that demonstrates your personal style and business approach at a glance. If this is not where your talent lies, trade services with a designer friend or tap the Internet for appropriate templates.
- Marketing. At minimum, you need business cards and a simple website to spread the word. When starting out, nothing beats face-to-face conversations with prospective clients, so start building your network even before you go into business.
- Planning ahead. Allow time for running your business as well as doing the work. If you fall behind in your billing, you will appear unprofessional to your clients.
- Workspace needs. Some people work just as productively at a coffee shop as in a home office. But to be successful, organization is vitally important, so be sure to designate a space of your own that is for business only.
- Setting your rate. This requires research. Professional associations often gather info on rates in your area. Measure your skills and experience against others who are already working independently. Be competitively priced, but don’t sell yourself short.
- Watching expenses. Start-up costs can be expensive, especially when you need to buy software. The Internet is a vast source of free software tools – some can be better than the brand-name options. The time you invest could be worthwhile.
GETTING TO WORK. If working independently is your dream job, finding clients and lining up projects might be keeping you up at night. Here are a few things to consider:
- Former employers. It’s often a good place to start, because you know what they want and they know what you can do. But, when you are a contractor, you’re no longer treated like an employee. In these instances, it may feel quite different to be an outsider where you once belonged.
- Networking. People you know and people you just met present many opportunities for work. Go to workshops. Join professional associations. Introduce yourself and let them know what services you provide. Pass out your cards, collect cards from anyone you meet and then follow up. It does get easier the more you do it.
- Drawing boundaries. Saying yes to every project and every client demand is a prescription for burnout. Know your limits and negotiate a workable schedule. Too often, contractors forget they have some leverage with clients. Use it wisely.
- Be prepared. Start a contingency fund and build it up while cash flow is good, because there will always be unexpected bills or a client who is slow to pay.
IS THERE AN EASIER WAY? Consider working with Hunter Hamilton as a 1099 contractor. You’ll retain your independent identity while having an agency represent you.
- Clients. Getting to meet with top employers isn’t easy without a personal connection. That’s where our client network comes in. We’ll broaden your client base instantly.
- Protected status. When you are aligned with Hunter Hamilton, you can work on-site, even full-time, while retaining your self-employment status.
- Focus on the work. You decided to “go out on your own” because you have special expertise and you enjoy your independence. But, if you could use more work and finding new clients is not always easy, call on Hunter Hamilton and we’ll open some doors for you.
MORE WORK. LESS HASSLE. Questions about 1099 contracting? Your recruiter has the answers.