RE: About 12% on post to tech-write list

Subject: RE: About 12% on post to tech-write list
From: "MM Deaton" <mmdeaton -at- mmdeaton -dot- com>
To: "TECHWR-L" <techwr-l -at- lists -dot- raycomm -dot- com>
Date: Mon, 7 May 2001 16:09:32 -0700

No, I did not say that "... the diff between W2 and
Corp to Corp is typically 12%."

I said one company that provides invoicing services to 1099 contractors will
do so for a fee that is 12% of the invoices it sends out for you. For every
$100 you bill, the invoicing vendor takes $12. That means 12% of all of your
gross income becomes an expense of doing business as an independent

You bear more of the costs of doing business when you are a 1099, or a
business contracting with another business. You have to purchase all of the
various license required by your state or city. You have to pay all of the
state or city business taxes, too.

You pay all Federal taxes, including all Medicare, social security, and so
on. Self-employment tax right now is, I believe 11%. This is on top of
whatever tax level you pay based on your net income.

However, you can deduct your expenses, but there is more time involved in
tracking all of those issues, and all of the time you spend doing
bookkeeping is time you cannot bill.

I think the decision to not go through an agency needs to be based on
something other than how much per hour you can charge. When you work through
an agency, they are bearing all of the costs you will have to bear when you
are your own business. They, in turn, are passing that along to the
companies that hire the people they source and act as employer-of-record
for. And they add a margin, from which their profit comes.

If you are your own business, you have to figure out the cost of doing
business and then what you believe a reasonable margin (profit) will be, and
that determines your rate. Once you do that, you have to spend time making
sure you track your expenses against your income so that the margin is still
there at the end of the day! And you have to provide yourself with health
coverage, unemployment insurance replacement, worker's compensation
equivalent, sick days, vacation days, and free soda pop!

I would probably save myself the grief and work through agencies if they
could find me challenging work that let me work from my own office whenever
I felt like working. But I gave up having someone else handle all the
paperwork and marketing in order to work the way I want to work.

And one last thought, if you typically work on-site for one company for long
periods of time, using their equipment and working under their direction, it
makes minimal difference that you have set yourself up as Joe Doe, Technical
Writing Inc. The IRS regulations on who is an employee and who is not are
focused not so much on who is their own company as on how the work is
carried out, where its carried out, and who makes the decisions. It is not
you who will get in trouble with this arrangement, however, it is the
company who hires you.

Working for an employer-of-record does not stop the IRS or the courts from
deciding you are really an employee of the company where you actually sit
down and do work. That is how the Microsoft permatemps won the right to make
stock purchases at the same cost as employees. Many of those in the class
action where, in fact, employees of an agency.

And that is why no person working for an agency can work at Microsoft for
more than one year without being released and not being able to come back
for some period of time which I have now forgotten.

-----Original Message-----

Hi Mary,

Did you say the diff
between W2 (my case
with no benefits) and
Corp to Corp is typically 12%?


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