As one of the leading Project Management Consulting and Staffing Firms in the US, we always keep our finger on the pulse of industry’s latest trends and innovations. Our goals are to help Project Managers understand what they need to achieve to remain competitive and excel in their career. This article is written to help independent project management consultants answer some basic questions related to 1099 employment. To learn more about visit, get hired.
1. What should be my 1099 hourly rate? In California, employers' tax contribution is around 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 is the payment term for independent consultants? Payment frequency is determined by the hiring agency and you. In general, most agencies will have a net-30 or net-45 payment terms. Have a detail conversation with your agency to understand the process. At Progile, we follow a standard 30 or 45 days policy for all independent consultant. To explain thing a little better, let's assume you start your assignment on 01/01/2018 and you submit your timesheet and invoice on 01/07/2017. Your first payment should be sent on 02/07/2017 for a Net-30 contract.
3. Why go independent vs W2? A W2 employment doesn't allow for any deduction. 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 you make $100k/yr on W2, you are paying taxes on $100k. However, if you make $100K on W2 but you have $30k in expenses, then you are paying taxes on $70K.
4. What can I deduct? There are books after books written about the tax deductions for independent consultants . However, some of the most common deductions are commute and transportation costs, software and hardware cost, or anything else related to the work. For a better understanding of deductions, please refer to the book on Amazon.
5. How often do I need to pay taxes? On 1099 or Corp to Corp, consultants are responsible for paying all taxes. For CA, we suggest all consultants to pay 25% to Federal and 10% to state every 3 months in order to avoid a lump sum payment at the end of the year. For more details, talk to your accountant.
6. How do I keep track of all expenses? Expenses can be tracked simply using excel. However, if this is your first time, there are several online tools that can help. We highly encourage to go with Quickbooks.
7. How often should I invoice? To keep tracking easy and consistent, we encourage all our consultants to send us an invoice when they are sending their timesheet. There are several invoice templates found online or utilize Quickbooks for the professional look and easier tracking.
If you have any other questions you would like write about, please comment.