As one of the leading Project Management Consulting and Staffing Firms in the US, we always keep our finger on the pulse of the industry’s latest trends and innovations. Our goals are to help Project Managers understand what they need to remain competitive and excel in their careers. This article is written to help independent Project Management Consultants answer some basic questions related to 1099 employment. To learn more go to: get hired.
1. How should I calculate my hourly rate? In California, employers’ tax contribution is around 11-13%. If your W2 rate is $100/hr, then the 1099 or Corp to Corp rate should be $113/hr. The 13% tax contribution may vary depending on the state.
2. What are the payment terms for Independent Consultants? Negotiate your payment terms before hiring. In general, most Agencies will have a net-30 or net-45 payment terms. Have a detailed conversation with your Agency to understand their process. At Progile, we follow a standard 30 or 45-day policy for all Independent Consultants. To explain this a little more clearly, let’s assume you start your assignment on 10/01/2018 and you submit your timesheet and invoice on 10/07/2018. On a Net-30 contract, your first payment will be on 11/07/18.
3. Why choose Independent Consulting versus W2? A W2 employment contract doesn’t allow for any deductions. With independent consulting, individuals can reap the benefit of tax deductions and end up with more money at the end of the year. For example, if your annual salary is $100k/yr on W2, you are paying taxes on $100k. However, if you earn $100k/yr on Independent Consulting but have $30k in expenses, then you are paying taxes on $70K.
4. What can I deduct? Independent Consultants have a plethora of books from which gain knowledge about tax deductions. However, some of the most common deductions are commute and transportation costs, software and hardware costs, or anything else related explicitly to the job. For a better understanding of the allowable deductions, please refer to this book on Amazon;
5. How often do I need to pay taxes? All 1099 or Corp to Corp Consultants, are responsible for paying their taxes. In California, we recommend our Progile Consultants pay 25% Federal and 10% State tax every three months to avoid a lump sum payment at the end of the year. For more information, discuss this with your accountant.
6. How do I keep track of all my expenses? Expenses can be tracked merely using an Excel Spreadsheet. However, there are several readily available expense monitoring online tools. We encourage our Progile Consultants to use Quickbooks.
7. How often should I send invoices? To keep time-sheet and expense tracking easy and consistent, we encourage our Progile Consultants to send an Invoice when sending their timesheet and expenses. It creates a fundamental process in bookkeeping. Quickbooks provides an Invoice Template which appears polished and professional and is easy to use.
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