Determining bill rate as an independent contractor

AprilZ81 · May 2015

I have a lead on a job that would be a part time contractor (10-20 hours a week with about 8 weeks of 40 hours a week). If I can get the hourly rate I need then it would pay a little more than what I'm bringing in from Unemployment, provide flexibility on work hours and allow me to still get pregnant and keep the part time hours after having a baby without having to pay for full time child care.

I think I've worked up the bill rate I need to net the money I would want to make to make it worth my time (roughly half of what I was making working full time).

I worked the math backwards, I wrote down what I wanted to take home over a year, added in federal, state and local taxes, plus the self-employment tax if I'm paid as a 1099 employee and a small amount to account for the additional expenses of needing a land line in the house for business purposes.

I would be able to write off some of our home expenses since I would have a home office (part of utilities, internet, mortgage, etc.). Are there any other expenses I need to consider to make sure I'm not working for free?

I shouldn't need a permit or need to register as a business, but I will be checking into that.

Erikan73 · May 2015

Sounds like you've got everything covered. Only question I have, would this position require any type of travel, like to go visit businesses or to pick things up? If so, then you should figure in cost of travel. If not, then I think you are in great shape. Great job on thinking about all the taxes.

maple2 · May 2015

I have limited experience with the home office write-offs, but what I learned when I looked into it a couple of years ago is that you have to set aside a designated area in your house that will not be used for any other purpose if you want to claim the deductions, and the amount you can claim is related to the size of the area you are setting aside. I'm sure there are others on this board who are more familiar with the details, but just wanted to make sure you factored that into you calculations so you didn't overestimate your write-offs.

hoffse · May 2015

maple2 said:
I have limited experience with the home office write-offs, but what I learned when I looked into it a couple of years ago is that you have to set aside a designated area in your house that will not be used for any other purpose if you want to claim the deductions, and the amount you can claim is related to the size of the area you are setting aside. I'm sure there are others on this board who are more familiar with the details, but just wanted to make sure you factored that into you calculations so you didn't overestimate your write-offs.

Yes this is correct. You can totally write off part of your home if you know the square footage of that space and you use it for business purposes. However, be prepared to be audited at some point over it, so keep up with your records accordingly. This is an area where a lot of taxpayers play fast and loose with the rules, so it tends to generate some scrutiny from the IRS.

vlagrl29 · May 2015

Yes I deduct my music room and my office - both are used for business. What kind of work do you do?

AprilZ81 · May 2015

I'm a meeting/event planner. We have an accountant so the tax write offs don't concern me, she will guide us through it (and DH uses home office write offs for his side business).

We have a 4 bedroom house and one rooms is currently a home office that serves no other purpose so we are good if we get audited.

I shouldn't need to travel with this position and if I do they will be client paid expenses.

maple2 · May 2015

I'm assuming you will be covered under DH's insurance? If so, do you want to include the difference in cost between an individual plan and a family plan?

AprilZ81 · May 2015

maple2 said:
I'm assuming you will be covered under DH's insurance? If so, do you want to include the difference in cost between an individual plan and a family plan?

I'm already on his plan so I didn't build in that difference, but that might be a good idea.

smerka · May 2015

I don't know if you included this, but a portion of the SE tax is refundable to you. Line 27 on the 1040.

AprilZ81 · May 2015

smerka said:
I don't know if you included this, but a portion of the SE tax is refundable to you. Line 27 on the 1040.

I read something about that but frankly, my head was full and I didn't quite understand why I had to pay it to begin with if it just gets refunded back to me.

smerka · May 2015

You get half of what the employer would pay back. Or 1/4 of the total.

Wulfgar · May 2015

It sounds like you have the home office down already. I am not sure if you could "double dip" though. I am thinking to take your own home office deduction you will have to have a separate room.

I do know that the last two houses my dad has owned he has a dedicated room for his work since he has been doing consulting for about 40 years.

Determining bill rate as an independent contractor

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