Riding the Job Search Roller-coaster.

Yesterday was a day of highs and lows. I’m at the tail end of the temporary job I’ve been working at trying to squeeze out one more week of PC refreshes before filing for unemployment and it wasn’t going too well. I had one appointment on Monday, nothing yesterday, and I have one today with nothing scheduled for the rest of the week. As I do every day, I scanned the job listings on the Michigan Works website, CareerBuilder.com, and Craigslist.

Found an ad on CL for a Desktop Support position in Brighton, which isn’t too far and which I’m already familiar with from having lived there in the past. So I sent off a resume with a short cover letter to the email address and went back to scanning for other possibilities. I’ve been doing this for months and I’m lucky if I ever get an email telling me to piss off, let alone a phone call, so you can imagine my excitement when the job on Craigslist called me a few hours later. I was told that they were hoping to fill the position quickly and that they thought I might be a good fit so could I be available to do a phone interview in about an hour or so. An hour later I was in a phone interview with the head of the project and the person who called me earlier. The job offered $19 an hour with no benefits, but it was a Monday-Friday gig with the potential for some overtime. The interview went well and they offered me the job right then and there with a start date of today. I asked if I could start tomorrow instead as I had some stuff to wrap up today and they agreed. Hanging up the phone, I was on cloud nine.

And then they emailed me the contract.

For the most part it’s the standard legal boilerplate I’ve seen throughout my career, but there were three provisions that concerned me. One was the standard if-you-invent-anything-we-own-it clause which is pretty standard practice, but this one seemed to suggest that they owned anything that might be copyrightable or patentable regardless of whether I did it at work or outside of work and it seemed to suggest that I would have to sign over rights to any copyrights or patents I already have which I’m not even sure is legal if that is indeed what it suggests. The next provision that worried me was about my being responsible for all business expenses which reads as follows:

The Contractor is responsible for paying for all expenses associated with providing the services hereunder. The Contractor will indemnify and hold the Company harmless from all expenses and costs incurred in the performance of this Agreement.

Now I’m assuming this is meant to say that I’m responsible for buying my own clothes and the gas to get back and forth to work, but I could also see where it could mean that if I have to replace a hard drive in the course of the job that I assume the costs of purchasing the replacement. I’ve replied back asking for clarification of these provisions so I know exactly what I’m agreeing to, but it’s the third one I’m worried about that may be the deal breaker and it’s pretty unambiguous:

No Withholding of Taxes, etc. The Contractor understands and agrees that, as an independent contractor, the Contractor’s compensation under this Agreement is not subject to withholding for federal, state, or social security taxes. All such taxes and other legally required payments and any insurance required by law shall be the Contractor’s sole responsibility.

I’ve been working as a contractor my entire career and this is the first time a company has said they won’t handle taking out taxes from my paycheck. I realize that for truly independent contractors that’s the way things work, but I’m not sure if I’m disciplined enough to do this task properly. As a result I’m leaning toward not taking the job which is really frustrating because it’s the first semi-decent paying offer I’ve had in awhile and the current job isn’t likely to have any more work for me until sometime in December.

For the moment I’m waiting to hear back from the company with answers to my questions about the contract and then I’ll make my decision. I hate to turn down a job that sounds like it’s a good fit for me and my skills, but I’d hate ending up in trouble with the IRS because I screwed up my taxes. Plus the idea of having to potentially turn over my blog to them is also somewhat disheartening.

13 thoughts on “Riding the Job Search Roller-coaster.

  1. Les, I understand your concerns about the lack of withholding but the unfortunate reality is that more and more companies are going the independent contractor route. Economically it makes sense for the company, shifting the tax burden to the contractor and avoiding the cost of payroll taxes, benefits and other employee-related expenses. You’re correct that it does take a certain amount of discipline to set aside money to pay your taxes. Remember, though, that as an independent contractor you are self-employed so you can deduct any business related expenses including mileage, tools & supplies, equipment, cell phone and even a portion of your housing and utilities if you use a home office for your work. Oftentimes, this can offset the taxes owed to the point that you pay little or nothing. A tax service, such as H& R Block, or a tax software program, like Turbo Tax, can help you maximize your deductions and complete your tax return accurately.

  2. That is a lot of you do not they do. I would urge that you have a very good clarification on those questions.

  3. I agree you should seek clarification on those terms, but I think it would be a mistake in the situation to not take this job because of the withholding thing. It’s added work, and new for you, but it’s doable … and, as you noted, it’s otherwise a good opportunity.

  4. I sent an email off to my brother asking him about this. He works as an independent contractor in programming so I’m assuming he has some experience with these contracts. I’ll let you know if I hear back from him if he doesn’t post here first.

  5. Thanks for the follow-up, dude!

    Kimmerlyn has it exactly right. Moreover, make the necessary deductions beforehand. If you’ve got a ballpark to what you’d normally pay from previous tax years, in that bracket, toss on an additional 20% of that for legroom, open up a second account (or several, even), and have the bank make a proportional cut on each deposit.

    So, if your deductions are ~10% of your pay, make the bank deposit 12% into a separate account. If you do wind up short, it shouldn’t be by a lot. Usually, you will wind up pretty far ahead – especially if you have a lot of deductibles.

  6. I’m expecting a phone call in the next few minutes to go over my questions with the HR person. I admit I’m really nervous about having to do my own tax withholding because it’s something I’ve never had to do before and I do rely on a family friend who works for H&R Block to do my taxes each year. Thinking about it gives me a headache.

    All of the feedback I’ve gotten suggests that I should take the job and do the best I can until I can find something else. Just don’t want to screw myself and end up being audited or something.

  7. Just got off the phone and after having stuff clarified and talking with a few friends who have done the self-employed thing, I went ahead and accepted the job offer.

    Should find out pretty quickly if I can do my taxes properly as the end of the year isn’t too far off.

  8. You would not be considered a high value target for auditing purposes. Do your best, keep your records, find some tools to handle it if possible, and all will be well.

  9. I’m a little late on this, but my brother sent me the following:

    Nobody withholds my taxes, and I wouldn’t want them to. One thing to keep in mind with contracts is that you can’t sign away your soul- it doesn’t matter what the contract says if the state says it can’t be signed away.

    As for owning ip outside of work, I wouldn’t worry much about that- don’t ask don’t tell then. That kind of thing would never be in my contracts, but that has to do with the field I am in. Software developers by default actually have rights to code written for someone. I deal in open source, always re-using things.

    I would worry about the indemnify clause- mainly that you don’t want to indemnify liability. I don’t understand what indemnifying the cost is in that job, maybe it isn’t a big deal.

    Pretty similar to what others have said here.

    As far as needing to budget for tax time and being disciplined with savings for it, I recommend following the Financial Peace system that Dave Ramsey developed. He throws unnecessary religious stuff into the system and will piss you off at points as a progressive, but his personal financial advice is probably the best (just ignore the other stuff). His system is easy to follow and has helped my wife and I work towards getting out of debt and learning to budget and stay on a budget.

  10. I for one and very happy to hear about this new opportunity for you. I also am a contractor responsible for everything. I would rather it be that way, It has it’s benefits. And downside as well. The downside is keeping receipts, but I have found if I set aside one hour per week and post to a ledger it is not all that troublesome. I do my own taxes, then send it to a CPA. They mostly just sign off on it at the end of the year. Cost about $500.00. I don’t cheat the IRS or do anything questionable. So I sleep well knowing if I get audited they will find ( Nothing ) questionable.

  11. Well the good news is my blog isn’t blocked at work. 😉 Though things are pretty busy here so I won’t have time to check in often.

  12. Les:

    My greatest concern about the job would be the tax situation. And that would feed back into the contract. Just because you are called an independent contractor does not make you one. Without more information, my basic assumption is that they are trying to pull a fast one on the IRS versus correctly classifying the position. You may choose to overlook the issue and I have in the past but it says volumes about the company.

    As for the taxes, it depends on how much money you will be making. If it is significant, you will likely have to pay estimated income taxes (state, federal) on a quarterly basis or will get assessed a penalty. Those are pretty easy to figure out though.

    A more important thing to remember is that you are responsible for the FICA taxes. Currently 15.3% of GROSS income. No deductions. This is a killer if you don’t remember.

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