Planning matters

Today’s Worker: The Independent Contractor

Not long ago, the norm would be to graduate from college, get a job, and stick with that job until retirement. But now one alternative is to graduate with a specific set of skills, find a contract position in your field, and then move from one contract to another, with a variety of different companies, gaining valuable work experience as you do so.

Being an independent contractor clearly has plenty of appeal, but there is a lot of uncertainty too. You’ve got a lot of issues to deal with: self-employment taxes, pricing projects, marketing your services, and collecting payments, to name just a few. It could be your ticket to a better work-life balance and even higher income.

Succeeding as an independent contractor can be challenging because it requires understanding a different set of key success factors than being a full-time employee. Here are some tips on developing your skill set as an independent contractor and where to turn to if you need help.

  • Contract for companies with generous payment terms. The time required for companies to pay its bills to contract workers varies from business to business. Investigate a company’s policy for paying its contract workers to make sure it’s what you’re expecting. 
  • Market your services by creating an online portfolio. If being a contract worker is your full-time job, you’ll need to always be looking for your next gig. One great way to market yourself to prospective businesses is to create an online portfolio that showcases the work you can perform. You can choose to build a website using a do-it-yourself service or hire a developer to create a custom website.
  • Plan what you’ll earn. As a full-time employee, you know the exact date you’ll receive your paycheck and usually the exact dollar amount. As a participant in the gig economy, however, you could earn a bunch of money in one month and hardly any money the following month. Prepare a financial budget so you can use income earned during your good months to cover costs during low income months.
  • Stay one step ahead of the IRS. Paying taxes is now your responsibility. Participating in the gig economy requires more knowledge about how to meet your tax obligations. So ask for professional help. Plus use other tools at your disposal. For instance, the IRS Gig Economy Tax Center gives guidance on how to figure out what you may owe the IRS. The website is https://www.irs.gov/businesses/gig-economy-tax-center.
  • Get advice from others. Working primarily by yourself can leave you isolated from fellow workers. Join a local group of self-employed workers that meets on a regular basis to network and learn what other workers are doing to be successful.

Remember that you are not alone. The complex nature of tax obligations for contractors can easily be navigated, and we’d love to help! Feel free to reach out.

 

Written By Paula Lee