Consulting Q

[JayhawkGirl]

My old company reached out and has asked me to do some consulting on a project they're working on. What do I need to consider when reviewing their offer? I'm assuming I'll be a 1099 employee, which I used to arrange for contractors we worked with, but I don't know much about the behind the scenes workings. Tax implications? Unemployment etc?

The offer will have to be compelling for me to act and I don't want to end up with minimal gain out of it. They tend to underpay and significantly underestimate the time and effort involved in projects. It's not an automatic yes for me.

[crashgizmo]

Former consultant here. The main thing I can share is that you want your rate (hourly or otherwise) to be double what you'd want a salaried position to be, due to the tax implications.

[Deleted]

Few other things:

- Insist on hourly billing, so if they suck at estimating time to complete a project you aren't penalized

- Agree on how often you will report your hours, how, and to whom in the contract (some companies expect an insane level of detail when they pay contractors, you don't want to deal with that....yes, tracking hours is fair, but you don't want to have to log what you did in minute detail)

- Who pays for travel (at what rate?), supplies, phone / internet / devices or anything needed to DO the project.

- Insurance? We require our consultants to carry insurance. (Not our employees, as we cover them, but former employees we contract work to as consultants.)

- Success measures and general timelines (and a general what to do if these need to change) - we scope these high level with each project, they aren't in the master agreement, but are in each individual statement of work we scope for each mini project that person takes on.

- "Reporting" - for lack of a better term, who are you accountable to? (May vary slightly by project but you also want 1 person who is your trump card if needed.)

[JayhawkGirl]

Thank you both very much.

[JayhawkGirl]

May 4, 2016 16:28:46 GMT -5 @kirkette said:

Do you have a CPA you can consult to see if there is a overall benefit to your tax picture?

No but I could easily get a referral. I have reservations for several reasons, primarily influenced by the 13 years I worked for them.

[blue38]

Definitely agree with crashgizmo and @shoegal here! I've only done one free lance project, but two main points we went back and forth on before agreeing on a contract was 1. Who is responsible for supplying/paying for the resources necessary to complete the project and 2. Who owns the work. Since I relinquished all rights, I leveraged that for a higher fee.

[underwaterrhymes]

As a consultant, you will need to file quarterly taxes. As others have said, you want to make sure your rate is 30 - 50% higher as you pay the employer's contribution to SS and Medicare - roughly 7.5% and have no benefits.

And make sure you are tracking by hour and not by project, as well as ensuring you call the shots with your availability. They can give you deadlines or schedule calls, but cannot dictate your overall schedule as that's one of the thresholds between employee and contractor.