Independent Consulting

[Flubber]

Originally posted by VetLegion
Sorry, I don't have any knowledge about what you seek.

What I am curious is what business are you in? I heard that consulting pays superbly, but I always wondered - what is it that an outside consultant can tell a company about it that its employees can't?

Its not taht consultants are any better than employees, its just that they are very convenient for shorter-term project work or when they have very specialized expertise. You pay a premium over what you would pay to employ the same skill set in an employee but you don't have any severance liability.

Its the same reason I am billing as a law firm lawyer while working all my time at a single client. They don't know if the project I am on will proceed so they rent my skills for now.

[Mr. Harley]

Mileage, business use of the car - but there are some very specific rules, go to the IRS site and download them. Unless you have a new vehicle milage is better than prorated depreciation, which can get very complicated.

If you live in an apartment with an extra bedroom, convert it into an office. The rules are VERY specific, but if it is a spare room, so to speak, you won't have a problem. You have to be careful, though, because if as a consultant you must do ALL your work at your future employers location, you may not have that deduction.

We were able to take it additionally because we knew we were moving before any audit could take place. Thus they would never inspect the office to nitpick over it's status. A business computer has the same rules, and that I am very careful about because it's not too hard to determine if there have been games on it recently. Since we run a network, having one machine dedicated to my wife's consulting was easy.

Tech is very nice, figure out your prorated taxes, and see if based on the very big bite that is being taken if it makes sense to upgrade your equipment. Remember, since you will be paying self-employment tax, your de facto rate is 7.75% higher than you initially figure (the employer's cut of SSI if I remember it correctly).

You can also take certain health care deductions, and depending on your job take our certain kinds of IRA's, like a SEP IRA. Get the IRS publication and look at the rules. Also continuing eduction that contributes to your employability as a consultant. Again, download the IRS .pdf on it and check if you qualify.

For us it required 17 pages of tax forms, but we shielded half of her income from taxes. So for us it was worth it. Hope this helps.