close this bookVolume 3: No. 28
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Independent contractors can take more tax writeoffs than can workers on payroll. To establish independent status, prove that you have freedom to choose jobs and to work with your own methods and tools, at your own speed, without supervision. Your case is strongest if you advertise in the Yellow Pages, have multiple clients, have your own office, incorporate your business or file with the IRS for an employer ID number, bill by the assignment, have your own invoice forms and business cards, accept no fringe benefits, and work under a written contract that can be terminated by either party _without cause_ on sufficient notice. About half the contractors taking the IRS or their state to court manage to prove independent status. James Reece, professor of finance at UMichigan's business school, recently won by showing that he received no fringe benefits for outside seminars conducted for a university center. [Richard Phalon, Forbes, 2/15/93, p. 136.]

Many companies prefer to deal with brokers rather than independent contractors. (This is often based on a mistaken reading of Section 1706, which regulates 3rd-party contracting arrangements but does not prohibit direct contracting.) If you need a "passthru" brokerage, Chancellor & Chancellor, Inc. wants a chance to bid. Their usual rate is $4/hour added to your salary. In return, they pay promptly and aggressively collect accounts receivable. Patricia Chancellor (chancell @well.sf.ca.us), (415) 332-0123, (415) 435-5532 Fax. [ba.j.o, 6/23/93.] (1706 forces you to be an employee of the brokerage, so don't expect health benefits, etc., from any other source.)

A rule of thumb for computing an hourly consulting rate is to divide a full-time salary for your line of work by 1000. [Virendra Agarwal (vagarwal@dis9002.shearson.com), alt.computer.consultants.] Rates differ with location, though. In St. Louis, there are EDP specialists getting as much as $300/hour. In other places you can only exceed $50/hour if you're a CS PhD, and then you won't find work if you ask less than $100/hour. Pick the best number you can, then adjust it as you learn the market. Your repeat clients will let you know if you start asking too much. [Brett (csbdb@ux1.cts.eiu.edu). Bill Park, 6/8/93.]