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More Previous Letters:Does this mean he likes us? Hey Great site. I just visited it for the first time and put it on my favorites. It has already been helpful as I recently formed a new company. I am interested in setting up a website down the line and am impressed by your format. I'll be a regular visitor. Scott Ratcliff Re-Orged Into Hell, and Feeling Inadequate I'm currently employed at a big R&D think-tank kind of company. After 15 happy years, I was reorg-ed into the portal to hell. I'm a graphic designer, and have always pursued a separate fine arts career. I have a Web site that is fine-art oriented, and since I've aquired most of the tools of my $ trade, I'm considering walking the wire without a net. Your magazine is very encouraging, and that seems to be the only thing I lack -- courage. I read an article in HOW Magazine about MacTemps [which has since been transformed into the Aquent Partners talent agency] that discouraged me from applying. Those of us who've been in the graphics art field a long time have gone from using Rapidographs to doing Web design. Today, the skill sets among graphic designers vary wildly -- this is true even within my company. I specialize in a few areas that are important and overlooked. For instance, I can make PowerPoint work cross-platform. To many firms, that is a hot commodity. I get outsourced to other departments for that purpose. Nonetheless, the article about your agency made me feel inadequate... so I guess I'll have to get creative and hustle up some business of my own. Thanks for the Web site... I hope there is life after corporate escape. jhcarter MacTemps was always considered something of an élite agency within the graphic-arts community, and now that it has been transformed into the Aquent Partners talent agency, it may have even more of a high-end image. It's true that the screening and testing process is rigorous, and only a minority of applicants make it through. This quality orientation is one of the things that makes Aquent Partners valuable to clients. This should not, however, discourage you from applying if you're interested. That may sound contradictory, but there are at least three reasons for our saying this:
The goal of Aquent is to help all independent professionals succeed, whether they wish to work through our agency, or find clients on their own, or both. Many people do both -- they work through Aquent Partners part of the time and build their own business part of the time. (Alternatively, members of our Partner Program work exclusively through us.) We think you'll find that applying to a good agency, or finding clients directly, or finding a new "regular" job are all similar in this respect: they require both hard work and courage. It's the courage to (possibly) fall down, stand up and dust yourself off, and dare to fall down again. There's no shame in that, by the way: most of the greatest people in history failed repeatedly until they learned what they needed to know. Persistence is much rarer than talent; you need both to win. Eventually, you'll stop falling down.
By the way, there definitely is "life after corporate escape."
Good luck. And Don't Forget the Skittles Hey! You guys are too US-centric! How about some stuff for us Brits? We need help too. Other than that gripe, you're looking good! Nigel GordijkThe Web Store <info@thewebstore.freeserve.co.uk> Tax Questions I just bought a house and a shop. I'm doing business out of the shop under a business name. Should I pay myself rent for tax purposes? Also, I own a bunch of tools I bought before I started this business. Should I sell these tools to my business? My business is a sole proprietorship. Lemuel Robinson Our tax columnist June Walker responds: Dear Just-Bought-A-House-&-Shop, The IRS doesn't allow you to pay rent to yourself and then deduct the payments as a business expense. There are a number of ways to get around that. For instance: If you were doing business as a partnership instead of as an IP, then the partnership (a separate entity) could pay rent to you. Another point: I don't know if you're married or not, if you live in a community property state, or what type of ownership interest you have in the building. All of these factors play a role in this tax situation. Depending upon the type of ownership you have and which state you live in, if your spouse were to own the house and shop, you could pay the rent to your spouse since you wouldn't be the owner of the building. Keep in mind that renting from your spouse, or receiving rent from your partnership would not reduce your income tax, it would only move income from one part of your tax return to another. There could be some Social Security tax savings, however. For instance, if you rented from your spouse for $1000 per month you would save about $1500 per year in lower Social Security taxes. The good news is that, regardless of your marital status or in which state you reside, you can deduct all your shop expenses on your Schedule C, Profit or Loss From Business. Expenses include everything from property taxes, utilities, and roof repairs, to depreciation. If the shop is a separate structure there is no limit on taking the expenses in the year they occur. If the shop is physically part of your home (part of your garage, for instance) and if your business does not have a net profit, you will have to carry forward some of the expenses to future years. As to your second question: you do not actually have to sell your tools to your business. Here's what to do: Make a list with four columns. In the first column write all the tools and equipment that changed from personal use to business use on the day you started your business. Next column, put the date that you purchased the item. Next, the purchase price. Next, write down the fair market value (FMV) of the item on the first day of business use. (Fair Market value is the amount that a willing buyer -- not your rich uncle but a stranger in the same business, for instance -- would pay for an item.) For your new business you will be allowed to reckon the cost of each tool as the lower amount on the list -- either the original purchase price or the FMV. In most cases the fair market value will be the lower, but if you bought a special tool five years ago that is no longer available, it may be worth more today than at the time you bought it. You have to use the lower amount -- it's an IRS rule. Where you put the cost of individual items on your Schedule C will depend on what the tool is and how you decide (or your tax advisor decides) to deduct it. I also suggest taking photos of the tools and equipment, to be kept with your tax files. (Also good for insurance purposes, by the way.) Good luck
in your new venture. Omniscient Critics San's inSANity column When the Bastards Criticize You hits home for me, and I want to mention another type of critic I have come across -- the one who thinks he knows everything. I used to work with a character like that. Let's say I needed to use a graphic file that I knew would not print very well. I wouldn't know if I should modify it to make it work, or to let it go, so that the guy I worked with (the critic) wouldn't cry out, "That's the client's almighty, sacred file! How could you have changed it! Now they are going to whine about it to me and they might not pay their bill because of you!" But, of course, if I did nothing, it would look terrible when it printed and the client would complain anyway. That was the course I chose (not to change the file). Naturally, the client complained and my snoopervisor got mad. He idolizes the people who put the money in the bank; the work they send is sacred to him. What could I say -- that I was afraid to "desecrate" the sacred file by modifying it even slightly so it would print properly? Really, I just wanted the know-it-all to learn a lesson, which I'm not sure he ever learned: either trust my experience and judgement, or don't. I've been doing this for a living for a long time and I know what I'm doing. If you are going to depend on my advice when you have a problem you can't figure out for yourself, then you have to listen to me. I wonder whether this guy would try to tell a surgeon how to perform an operation on him. He probably would. I just hope that the surgeon would be smart enough to ignore him and do what he thought best, instead of reacting the way I did. Michael Woods Proving You're Free I'm enjoying your "e-zine" very much and find it very relevant to common IP issues. After reading June Walker's column You Say You're Self-Employed...?, I still had a question. I am an independent training consultant, and I sell my services directly to client organizations as well as working through agencies. I control my own time, work mostly from home, and am not told how to do the work. Although I'm hired on a project basis, I generally charge an hourly or daily rate to the client or agency. I have an employer tax ID number and carry my own insurance. Once in a while an agency will only want to pay me by W-2 wages. I prefer to be paid 1099 wages as an independent contractor because it allows me to contribute a percentage of those wages to a Keogh plan for retirement. The agencies are often unclear as to why they insist on paying W-2 wages, except to say they are fearful of repercussions from an IRS audit. It appears I meet the IRS criteria for self-employment, so what are the legitimate concerns of the agencies? How can I help to ease their worries so that they will be more open to paying me freelance wages as a 1099? I appreciate your assistance. Russ June Walker responds: Just because the agency is intimidated by Uncle Sam doesn't mean you need to be. Here's what you should do: First, to be sure you're really self-employed, read my column (immediately following the one you already read) about Criteria for Self-Employment. Also, download IRS Publication 15-A and read Section 2. Employee or Independent Contractor. If, after that, you still have doubts about your status, get hold of IRS Revenue Ruling 87-41. (Although it is no longer in print, you can get a copy from the nearest federal depository library.) After you
have this information in tow and are confident that you're self-employed,
you should file FORM SS-8 ("Determination of Employee Work Status for
Purposes of Federal Employment Taxes and Income Tax Withholding") with
the IRS. The form is long but easy. You will then receive documentation
from the IRS confirming your independent contractor status. You can
show the documentation to the apprehensive agency to allay its fears.
Sacking Groceries for Fun and Profit The site looks very good. With minor exceptions I haven't been a wage slave since 1981, so I can certainly relate to the magazine. There are some shortcomings to this life, and on days like today in particular I wish I was sacking groceries in exchange for the certainty of a paycheck, but on the whole having control of your own life is more than worth it. Greg Bailey Not Having Fun I think a good topic for you to cover would be health insurance coverage. How should self-employed individuals get information on plans? What do the different options mean? I'm going through researching this on my own right now and it isn't fun. Lisa Glassberg Strengthening But Scary I like San's ethics in his inSANity column, Always Ready to Walk. It totally makes sense to me. I recognize the strengthening process I am undergoing when I'm in "down time." But it still scares the S__ out of me! I actually think that the fear is a motivator, however. I wouldn't work so hard to improve if I wasn't worried about paying the rent. Great column, by the way. Shannon Swineheart We'll Wait for the Video There is an abundance of poorly designed web sites, however yours stands out as an exception to the very boring norm. Bravo! I'm an assistant film/video editor... Aquent intrigues me and I'd like to be affiliated with an organization that creates some sort of cohesiveness for the "freelance" worker. Please let me know if we might have something to discuss regarding representation, training and benefits. Good job! and thanks, Frank L. Strauss Thanks for
the praise. We've forwarded your query about film and video editing/post
production to our talent agency, Aquent
Partners. By the way, when independent professionals inquire about
agency representation via email, it would be useful to include your
geographical location. That way we could forward your inquiry directly
to the Aquent Partners office nearest you without having to re-contact
you first (we currently have 40 offices around the world, with more
to open soon). Leaving Our Fingerprints on His Career I work for the local Sheriff's Department as a crime-scene investigator and Latent Fingerprint Examiner. I've learned that the Police Department's fingerprint examiner is leaving, which means that I'll be the only one left in this area with the expertise to do this kind of work. I've heard through the grapevine that the Police Department may want to offer me a contract, or perhaps a part-time job, to do exams on their priority cases. This would be in addition to the full-time job I already have. Since nothing like this has ever happened to me before, I'm trying to be prepared if the offer is made. I have several questions. Will I be their employee, or an independent contractor? If I'm an IP, how will this affect my tax situation? How much should I charge? Will there be conflicts between my full-time job and this part-time job? How could I avoid such conflicts? Results of fingerprint exams are often a critical part of an investigation, and there can be pressure to complete the exam quickly. Do you know of any other examiners that do something like this? If you have any advice or other resources or people I can check with, it would be greatly appreciated. Sincerely,
We never cease to be amazed by the wide range of work that can be performed on a contract basis. We're not fingerprinting experts, but let's consider each of your questions in turn. Whether you'll be an IP or an employee is often a complex issue. It's partially determined by what arrangement you make with the client/employer in advance. Relevant factors include what you're "called," the method by which you're paid, the degree of supervision, and various other details. Ultimately, no matter what you (or the client/employer) call it, the IRS may have their own view of your status based on the details of the specific situation. Luckily, our Finance and Tax Columnist, June Walker, has been dealing with precisely this issue in her recent series, and you should read her thoughts on this carefully. If that's not enough to clarify your situation, you'll need a personal consultation with a tax advisor who specializes in IP issues. As June cautions, most tax advisors aren't very knowledgeable in this area. Ask your potential advisor to talk to you about the IRS rules of thumb for who's an independent contractor and who isn't. If they draw a blank, they're not the advisor you need. By the way, you need to get clear on this before you start on any work arrangement. The same advisor who helps you figure out whether it would legally be an IP gig or a part-time job could also help you figure out how it would affect your taxes. Alternatively, you could educate yourself further on these legal/tax areas -- there are various books and articles on the subject, some of them available on the IRS Web Site or by searching the web -- but only you can decide if that's an efficient use of your time, or if you're better off finding a tax advisor. As for how much you should charge relative to your current hourly wage: if it's truly an IP situation, you'd normally charge at least a third more, and probably twice as much per hour. That differential compensates you as an IP for the built-in inefficiencies of having to market yourself, fund your own health insurance and retirement, etc. Of course, in this situation that may not be all that relevant. In general, to the extent that the "IP" gig is really like a regular job (full-time or part-time), the pay differential diminishes. By the way, part-time regular jobs usually pay less per hour than full-time regular jobs of a similar type. As for conflicts, the only way you could know if there'd be a conflict of interest would be to ask your current employer. In a local/regional situation such as you're in, they'll find out about your moonlighting soon enough anyway; better to get it out in the open up front. It sounds like you're more concerned about time conflicts. If the moonlighting is a part-time job, then perhaps you'd be working predetermined hours at each job and you could simply state in advance that you might not be able to work beyond that. If the new gig is more like real IP (freelance) work, then you simply need to inform the Police Department up front that your primary commitment is to your day job with the Sheriff's Department, and that you'll be happy to help the police but only on the understanding that there will be no hard feelings if you can't work long hours in some emergency situations. They may not be thrilled to hear this, but openly clarifying your work parameters up front is the key to avoiding problems later. In fact, we'd advise getting an agreement in writing, specifying at least the following three things: pay rate, the limit on hours you promise to be available to work, and liability (more on this in a moment). We suggest you get a written agreement nailing down as many of these issues as possible. It needn't be some forbidding-looking contract; a simple letter written in plain English will do fine, as long as it's clear and both parties sign it. The point about legal liability may not have occurred to you. If you're an IP, you could potentially be held legally liable for errors; only regular employees are normally shielded from such liability. We can easily imagine a lawsuit arising if, for example, someone were imprisoned based on a fingerprint exam, the accuracy of which was later called into question. An agreement with the client (in this case, the Police Department) promising to "hold you harmless" in the event of errors might protect you from some liability, although only a lawyer could tell you if that would work in this kind of situation. Taking out E&O (Errors and Omissions) insurance is another approach. (Aquent plans to make E&O insurance available for IPs soon, but unfortunately it's not quite ready yet.) In general, we don't know of any other fingerprinting experts who can give you more specific advice, but you can try finding them via the major web search engines like Alta Vista or Yahoo. You might also try searching Deja.com for online discussion groups where other people in your field may have posted. Perhaps other readers will write in with other ideas, or contact you directly. Good luck!
Looking For An Agent I'm an art director for a small company. The job has been wonderful for expanding my portfolio and experience. However, my ultimate goal is to work for myself. The jump from full-time company employment to self-employment is as frightening as it is exciting to me. If only I could have an agent, someone to take care of the business details, then I could concentrate fully on being creative, and ultimately serve clients much better. According to what I've read, Aquent is exactly what I've been looking for. I want to know more, and I'd like to meet with someone to learn where I could fit in at Aquent. Shannon Swineheart Many independent professionals who read this magazine like to work directly with clients. Many others like to work through an agency. Some do both. Aquent's talent agency, which does represent "creative" professionals like yourself, is called Aquent Partners. We're forwarding the full text of your letter to them, but we also encourage you to call the nearest Aquent Partners office as you planned. By the way,
it would be helpful if people who write in with various questions could
tell us what city they're in. In this case, for example, that would
allow us to forward your letter directly to the nearest Aquent Partners
office without having to query you first. (There are currently 41 offices
around the world, with many more planned soon.) Blooming Publisher I think you are doing a great job with this magazine. As a blooming Publisher, I am always interested in finding out what others are doing. I actually read everything in your Magazine (very rare happening). Keep up the good work. Audrey Christie |
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