Working as an independent contractor is a great way to earn a living or to make extra income. As an independent contractor, you have the autonomy to set your own guidelines for how you want to work and when. Anyone, regardless of immigration status, may engage in independent contractor work without work authorization or an SSN.
What is an Independent Contractor?
As an independent contractor, you are self-employed and you produce a specific type of work product in a determined amount of time. Some independent contract work is considered a gig, such as performing music at events or driving for a ride-share service, and other times it’s considered a professional service such as producing fine art or landscaping.
What’s important is that you have a vision in front of you about how this work is going to not only bring in income, but also how it might be personally gratifying and sustainable.
The Gig Economy
The Gig Economy refers to a growing segment of the labor market, in which clients contract with workers, often via apps, for specific tasks and activities. The gig economy has endless options and often does not require high educational attainment.
Gig opportunities include:
- Driving a car for ride-share services such Uber or Lyft.
- Selling products on sites such as Etsy or eBay.
- Performing music at paid gigs and concerts.
- Working for freelance labor apps such as TaskRabbit.
- Renting space in your home with sites such as AirBnB
- Any one-time, task-based job.
Professional services exist in a variety of industries. In addition to participating in the gig economy, individuals may choose to leverage their expertise, skills, abilities, certification, and professional and academic training to offer professional services to the public. The ability to provide them requires experience, passion for a specific type of work, and in some instances, licensing or educational attainment.
There are many different types of independent contract work you can do, allowing you to leverage all the skills, experience and knowledge that you have accumulated over time both inside and outside of school. You can start in the gig economy and work toward offering specialized professional services.
Some examples of professional services may include:
- Computer Programming
- Dog Walking
- Fine art
- Graphic Design
- Payroll Management
- Real estate
- Website Design
- Writing and editing
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Key Questions Before You Start
Take a few moments to think about your answers to the following questions. Having a vision in mind for how you might benefit from the gig economy or by offering professional services will help you focus your mind, your time, and your energy.
What are your skills?
What kind of skills do you offer to clients?
Be honest about what work you are particularly good at producing. Having an honest understanding about your skills and which of them excite you the most gives you a good sense of which direction you might take as an independent contractor.
Find Your Passion
What is it about this work that excites you?
There’s money, yes, but why are you interested in this particular work?
Perhaps you want to reap some reward for a skill you perfected, or maybe you simply love music, accounting, or teaching that high-intensity fitness class. Maybe you have an old skill you can breathe new life into and make some extra money. Or, maybe the market is right for your talent and you can take advantage of that skill today.
Whatever it is, your reason for becoming an independent contractor should be something that excites, motivates, and rewards you personally and financially. So what is it for you?
What is your market?
Who will pay you for your services, and how much are they willing to pay?
Think about the following questions:
- With whom will you interact on a regular basis?
- Who do you see as your customers?
- What do you know about them?
- Do you know how much they are willing to spend on the product you’ll make or the service you’ll provide?
- How might you go about contacting them?
Payment & Planning
What kind of payment terms do you prefer? Do you need to be paid immediately, or can you offer a longer term payment option to clients?
While it’s always nice to get paid up-front or at the completion of a project, it’s a good idea to have a sense about how you’ll get paid. You can negotiate a down payment, installments, balance due at completion, and a processing period in case invoices need to run through their accounting department.
For example, one common practice in receiving payments is Net 30. Under a Net 30 payment plan, you’d receive payment within 30 days from when you submit an invoice.
How many hours a week do you expect to work for this gig or professional service?
How many hours you work as an independent contractor depends on many factors such as your availability, customer need, or the anticipated duration of the project. It’s wise to still have a sense of how you’ll invest your time, and how much of it you’ll give to work and how much to life. Keep it balanced – burnout is a real thing!
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Being an Independent Contractor comes with some legal considerations. Familiarize yourself with The Immigration Reform and Control Act (IRCA) and the Basic Guidelines for Independent Contractors described below.
The Immigration Reform and Control Act (IRCA)
The Immigtration Reform and Control Act of 1986 (IRCA) states that it is illegal to knowingly employ unauthorized workers in the United States.
IRCA requires employers to verify that everyone is legally authorized to work in the US using the I-9 System. An exception to this rule, however, is that an individual or entity is not required to obtain Form I-9 from independent contractors or sporadic domestic workers.
This is important because individuals who fail to comply with Form I-9, or who knowingly hire or contract undocumented individuals, may face civil fines, criminal penalties, or debarment from government contracts. The form provides a paper trail of sorts, and verifies that they knowingly are hiring an individual with work authorization.
Basic Guidelines for Independent Contractors
An individual is an independent contractor if the payer has the right to control or direct only the result of the work and now what will be done and how it will be done.
The earnings of an independent contractor are subject to self-employment tax.
The IRS Common Law Rules determine the rubric for determining if one is an independent contractor or an employee, which include behavioral control, such as facts that show whether the business has a right to control how the contractor does the task for which the individual was hired to do.
In terms of financial control the IRS is concerned with business aspects such as how a worker is paid, how expenses are reimbursed, who provides equipment and tools, and so on.
Lastly, the Type of Relationship examines facts that show written contracts, financing of benefits, permanency of the relationship, and more. More information about these guidelines can be found in the IRS Employer’s Supplemental Tax Guide (Publication 15-A).
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Tips to Start Earning
Getting started as an independent contractor can feel a bit daunting at first, but with some practice you’ll learn your way. Here are some helpful tips to help you get started:
- Make sure that the work you want to do follows the independent contractor IRS guidelines.
- Know the legal aspects of working as a contractor.
- When talking with prospective clients, highlight your assets and skills, and demonstrate how those meet their needs.
- Research similar types of work you do so you know the standard rate for your services.
- Get familiar with writing contracts and make sure you sign a contract with every client.
- Promote yourself via social media platforms.
- Join an independent contractor network such as IQ network.
- Get active in your local business community to meet prospective clients.
- Network! Network! Network!
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How to Talk to Potential Clients
Here are some tips and advice about how to talk with potential clients about independent contracting.
- Set up a time to meet with new contacts, and offer to pay for lunch or coffee.
- Be prepared to talk about legal aspects of independent contracting as this offers some protection for both you and your prospective client.
- Talk about how your previous work and education experience aligns to a proposed scope of work.
- Talk about how your services align to their needs.
- Talk about what differentiates you from your prospect’s other options.
- Know your competitive rates for the services you provide.
- Ask a lot of questions and listen:
- What are their biggest and most immediate needs?
- What has been their experience in working with consultants and contractors for this line of work?
- What are their expectations in terms of the work product, time, budget, etc.?
- List out the next steps you both will take before you close your conversation.
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Contracts are important as they protect both you and the person or business that has hired you. This protection comes through the nature of the contract which defines the terms of engagement for clarity around nature of work and expectations. It also provides evidence of the intended arrangement that you intend to work as an independent contractor and not as an employee. It allows the parties to think through key aspects of the working relationship, and makes clear additional provisions of the working relationship, such as keeping certain elements of the work confidential, making clear who owns the work product, how the contractor can talk about the project in their marketing, and many more arrangements.
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What Forms You'll Need
As an independent contractor, the IRS will require some forms to be submitted for tax purposes. Send these forms to your tax preparer. They include:
Individual Taxpayer ID Number (ITIN) Form W-7. Users complete this form to apply for, or to renew an existing, IRS individual taxpayer ID Number. Access the form on this page.
Request for Taxpayers Identification Number and Certification Form W-9. This is the form independent contractors submit to the person or companies who have hired them. They in turn file this information with the IRS, and include information about how much you were paid. Access the form from this link.
Miscellaneous Income and Form 1099. You will receive this at the end of the year and it records how much this individual paid you. You should collect as many 1099s as W-9s you received.
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Below you’ll find some handy resources for getting started as an Independent Contractor. It’s a mix of legal, financial, and marketing resources.
Marketing and Promotions
Now that you have an idea of the type of work you would like to do as an independent contractor, you will need to start thinking about marketing your services. You can begin by creating a profile in several marketplaces, but you will likely have to do additional marketing.
Below are just a few ways to promote and market yourself:
Create business cards and add a QR code to link to your website or LinkedIn profile.
- Purchase inexpensive business cards: www.vistaprint.com
- Create your free website: www.wix.com
- Create free QR codes: www.qr-code-generator.com
Consider creating a flyer/brochure to promote your services.
- Use free Microsoft Office templates: templates.office.com/en-us/brochures
Post an ad on social media promoting your services.
- Learn about FB ads: www.facebook.com/business/ads
Working for Yourself Resources
Sample: Independent Contractor Agreement (California)