A way to quickly summarize independent contracting is that it’s essentially owning your own business and contracting your services to another person or company. For those of you unfamiliar with independent contracting, you may want to consult the IRS website for further details.
A word of warning… if you are screened for a contracting opportunity and you tell the recruiter that you have no idea what an independent contractor IS, that recruiter will most likely close the discussion and instruct you to review the IRS website prior to rescheduling another screening. Additionally, this will almost certainly be noted in your applicant profile, which may hinder further consideration for opportunities within that company.
There are major differences between independent contracting and employment. These differences can be very confusing at times, not only for contractors, but also for recruiters. Recruiters are even restricted in what words they can use when screening candidates. Legally, they are not allowed to call the work “work”, or a “job”. They must use words like “opportunity” and “program”. “Interviews” are called “screenings”.
Independent contractors (ICs) should also be familiar with:
Business regulations in your own state – Taxation and laws differ in each state for small businesses. You will want to consult the Small Business Administration in your area as they can provide you not only with comprehensive information regarding legalities, but also counsel you on business planning, taxes, etc., or point you in the correct direction to find that information.
Insurance – You may be required to carry business insurance. Check with a local agent, or the SBA may be able to provide you this information, or again, point you in the right direction. You will also need to have your own health insurance.
When supporting a client as an IC, you will not receive benefits and the company you assist will not deduct taxes from your paychecks. So, don’t be too excited about your “windfall” when you receive your first bit of pay as an IC. You will not only be responsible for paying income tax, you will also owe a self employment tax on your net income, which is approximately 15%.
Reporting your income at tax time can also be much more complicated. I highly recommend that you find a local tax expert in your area to assist you with your taxes. Although they may be costly (usually $200-$400), they can save you future grief from incorrectly reported earnings.
This information has not been put forth to deter you from becoming an independent contractor. This lifestyle can be a very fulfilling way to telecommute. You have the freedom of choosing who you would like to contract with, and many times what hours you will work. You can provide varied services, possibly supporting an executive as an assistant during the day,while answering phones at night for a dispatch service. All the while filling out surveys for cash or shopping to earn rewards points. There is a lot more flexibility in offering your services in this capacity.
