There are definitely some attractive perks such as controlling your own hours, having a better lifestyle, picking and choosing the jobs to take on, etc. Hey, you can be your own boss!
The marketing, public relations and advertising communities often staff consumer insights, traffic manager, digital, CRM, creative, product manager and brand manager positions in this capacity. In fact, freelance opportunities exist in all areas and levels of the business, but it’s a matter of being at the right place at the right time.
Candidates often ask us if we recommend taking this route. There is no way to predict how stable this lifestyle will be, and you should prepare yourself financially for periods when no work is available.
One important aspect to consider is how you’ll report your income to the IRS. There are two ways you can present yourself as a temporary worker: Independent Contractor (filing a 1099 form) or an employee (filing a W-2).
Employers tend to want to work with the 1099 candidates to avoid paying additional mandatory expenses (i.e., liability insurance, matching Social Security and Medicare, state and federal payroll taxes, workers compensation insurance, costs of unemployment claims, etc.).
Below is a comparison of the two:
· The 1099 Independent contractor is considered to be ‘under contract’ and not an actual employee. Independent contractors file a 1099 form to report income to the IRS. The 1099 worker won’t have any taxes withheld from paychecks to cover income tax, Social Security, and Medicare. Also, the 1099 worker will have to pay the IRS estimated tax four times a year as opposed to one time. That being said, 1099 workers must carefully estimate the amount owed to the IRS and set that money aside to avoid being penalized if a payment is missed. It is a good idea to set up a different bank account to track all of the business-related expenses. The 1099 worker can write off business-related expenses (http://www.irs.gov/businesses/small/article/0,,id=109807,00.html), which is definitely a perk!
· The temporary employee who files a W-2 will have taxes deducted. This is often more attractive as there is not as much work involved to report to the IRS; however, there are some consequences as well. For example, a W-2 employee will get a lower hourly or daily rate than the 1099 worker because it is more expensive for an employer to cover additional mandatory expenses of an actual temporary employee. Additionally, the W-2 employee must deduct their expenses as a misc itemized deductions and lose the first 2% of such deductions as travel, phones, entertainment, internet, etc.
Most full-time freelancers or consultants file as a 1099 because they can write off business expenses, get a higher rate of pay and get more leads due to employers preference to hire the candidate with less financial implications involved.
If this path is for you, make sure you consult with a tax advisor to steer you in the right direction. Gary Eisen of Kolodriej, Eisen & Fey can give you more information. He can be reached at gary@keandf.com.
