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Consulting vs. part-time w*rk
Old 02-15-2007, 06:44 PM   #1
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Consulting vs. part-time w*rk

Hi all,

I haven't been around in a while...

Here's the deal: I retired after 32 years in Corporate America (only 2 different companies in all that time). Loved my job, even when I left, but didn't need the income anymore and wanted more time for me, so I left on good terms. After a couple months off, I took a part-time job for peanuts at my church - not for the money (obviously) but to serve and to keep some structure in my life, which I like. After 7 months of that, I'm finding that there are some style issues that really get on my nerves, and I don't think I want to do it regularly much longer.

In the meantime, I've kept in touch with my old work buddies, and they are still up to their ears in projects. My ex-boss (who is the greatest boss ever) wants me back in any way she can get me. She offered 2-3 days per week, any way I wanted to do it. It actually appeals to me, because I could pick my projects, still have contact with my old cronies (I really like these people), have something stimulating to do, make some fun money, and still have a 4-5 day "weekend" every week.

Ex-boss will send me her proposal next week, and the options are to work as a consultant or actually come back as a part-timer, probably 18-20 hours per week. Can you help me with the pros & cons? I know as a consultant I'd probably have more flexibility (hours-wise) and the money would be a lot better. But then I'd have to do all the tax jazz, which I've never had to do before. As a part-timer, I'd have at least some benefits (which are awesome at this company) and be eligible for bonuses, vacation (4 weeks per year) etc.

In either case, I'd only have to go into the office once or twice a week and can work from home the rest of the time.

Any input? And yes, I know "none of the above" is also an option.

Thanks!
CJ
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Re: Consulting vs. part-time w*rk
Old 02-15-2007, 07:19 PM   #2
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Re: Consulting vs. part-time w*rk

FWIW, my wife left her job last year to take care of our daughter. Her company needed her services in a bad way ( Biotech, she gets the FDA to approve the product for sale, kinda impedes cash flow when that doesn't happen). So they wanted her to be a part time employee. Upon the advice of her former boss ( who chose consulting) she insisted on a consulting agreement. The terms are six months, and a good hourly rate. The tax estimate checks aren't too much of a hassle, and she really enjoys the difference from being an employee. Basically her computer has become an ATM machine. We need to buy some stuff at home depot? No prob, work a couple hours and it's paid for. Now she gets to work almost exclusively from home, and she only averages 10 hours a week, so your mileage may vary. But the relationship with her former management is much more pleasant, it's just request product, recieve product, no negative boss/underling relationship.

Now she knows from her friends still working there that the VP gripes about her hourly rate and they have tried 3, yes 3 times to hire a replacement so they could not renew her contract again. Each one has not worked out. And if the VP had any sense she'd stop trying, because I firmly believe DW is getting almost as much done in 10 hours a week as she did in 40 at the office. I think it's a win-win.

So yes, firm vote for consulting vs. part time work, if you don't need to worry about the increased risk of work termination, the day to day atmosphere is so much nicer.
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Re: Consulting vs. part-time w*rk
Old 02-15-2007, 08:11 PM   #3
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Re: Consulting vs. part-time w*rk

Is there a pension involved here? Would going back to work part-time for the same company have any effect on it?
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 06:09 AM   #4
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Re: Consulting vs. part-time w*rk

Laurence - good feedback, thanks! Do you have an accountant to handle the taxes? It's just such an unknown for me. I guess I could consult with a CPA to get it figured out, then take it from there.

I'm probably like your wife in a way - I worked in IT, but on a very specialized system that pretty much no one knows. They have tried to hire people, but either the people don't "get it" or don't want to do the work. So I could do as much or as little as I want to, and they would be thrilled with that.

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Is there a pension involved here? Would going back to work part-time for the same company have any effect on it?
No - no pension.

Thanks!
CJ
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 08:19 AM   #5
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Re: Consulting vs. part-time w*rk

When I ERd I made myself available for some HR consulting doing work I enjoyed many years ago - grievance examinations, mediation. The old skills came right back and the work was easy for me. I was able to work short projects and keep the hours down as much as possible. But as time went on I realized I really didn't want to work anymore. It was mainly of a safety blanket or something - to have a job I could fall back on. I cut way back and told my employer to feed cases to people who need the work and only send me cases that get backlogged. My last case was sometime in November. I am still on the rolls but I'm thinking of telling them to drop me.
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 10:27 AM   #6
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Re: Consulting vs. part-time w*rk

Quote:
Originally Posted by cj
Hi all,

I haven't been around in a while...

Here's the deal: I retired after 32 years in Corporate America (only 2 different companies in all that time). Loved my job, even when I left, but didn't need the income anymore and wanted more time for me, so I left on good terms. After a couple months off, I took a part-time job for peanuts at my church - not for the money (obviously) but to serve and to keep some structure in my life, which I like. After 7 months of that, I'm finding that there are some style issues that really get on my nerves, and I don't think I want to do it regularly much longer.

In the meantime, I've kept in touch with my old work buddies, and they are still up to their ears in projects. My ex-boss (who is the greatest boss ever) wants me back in any way she can get me. She offered 2-3 days per week, any way I wanted to do it. It actually appeals to me, because I could pick my projects, still have contact with my old cronies (I really like these people), have something stimulating to do, make some fun money, and still have a 4-5 day "weekend" every week.

Ex-boss will send me her proposal next week, and the options are to work as a consultant or actually come back as a part-timer, probably 18-20 hours per week. Can you help me with the pros & cons? I know as a consultant I'd probably have more flexibility (hours-wise) and the money would be a lot better. But then I'd have to do all the tax jazz, which I've never had to do before. As a part-timer, I'd have at least some benefits (which are awesome at this company) and be eligible for bonuses, vacation (4 weeks per year) etc.

In either case, I'd only have to go into the office once or twice a week and can work from home the rest of the time.

Any input? And yes, I know "none of the above" is also an option.

Thanks!
CJ
I don't know you... but reading your post, the one thing that seemed to really shine through is that you really, really enjoyed working at your former job. I am thinking that your retirement may have been premature, even if you could afford it.

My vote is yes - - go for it!! You can always put some of the extra money into a Roth for later use, if you don't need it now. Life is to enjoy, and if you enjoy working, then do it!
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 10:50 AM   #7
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Re: Consulting vs. part-time w*rk

Many years ago I knew a guy who had retired from his job with a full pension and therefore didn't need additional income (his own words) but he started a one man company to do consulting work for which he was well paid. Since he didn't need any additional income he structured his company and its DBP so that all the consulting income was tax defered. So since you don't need the money, if you go the consulting route you could do something similar.
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 10:58 AM   #8
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Re: Consulting vs. part-time w*rk

Quote:
Originally Posted by cj
Laurence - good feedback, thanks! Do you have an accountant to handle the taxes? It's just such an unknown for me. I guess I could consult with a CPA to get it figured out, then take it from there.

I'm probably like your wife in a way - I worked in IT, but on a very specialized system that pretty much no one knows. They have tried to hire people, but either the people don't "get it" or don't want to do the work. So I could do as much or as little as I want to, and they would be thrilled with that.
No - no pension.

Thanks!
CJ
So, no we don't, but ah, full disclosure, Dad is retired IRS and step-mom has been preparing taxes for years. In fact, she's helped me file every return since I was 18 - 14 years! So I understand how it can be intimidating. As long as you fire off the quarterly tax estimate checks, though, you aren't going to get "in trouble". We had all sorts of plans to shelter the income from taxes, but unfortunately, we really need it to keep the lights on - kind of shows you how the middle class gets squeezed by the tax system. :P
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 10:59 AM   #9
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Re: Consulting vs. part-time w*rk

cj, I was in a similar position a year ago...only our office was shut down so I had to leave the company (or move overseas). Like you I really like the people that I work with, including my boss. I have gone the consultant route for the past year, and find it a mixed bag. I work about 3/4 of the time at home and 1/4 of the time in an office in Indonesia. I like the flexibility that working at home brings, but I sorely miss the camaraderie and shared sense of purpose of the office. When I travel to the overseas office for 3-4 weeks at a time, I hate the flights and dislike being away from my family, but I really enjoy being back in an office with friends who I've worked with for many years.

The tax issues involved with consultancy (at least as a sole proprietor) are not that difficult to deal with. You can handle it with TurboTax (or similar) or with a CPA. The money, while it seems better at first, for me really isn't, after self-employment taxes and no benefits/no bonuses/no paid vacation are taken into account.

My advice to you is to, whether as consultant or part-timer, set up the working arrangement as flexibly as possible so that you can feel your way along and eventually settle on an arrangement that makes you the happiest. It seems like you're not doing this primarily for the money, but instead for personal rewards. So try to maximize those parts of the job that you find rewarding, and don't worry so much about the other things (money?).
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 11:08 AM   #10
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Re: Consulting vs. part-time w*rk

Quote:
Originally Posted by Laurence
.. As long as you fire off the quarterly tax estimate checks, though, you aren't going to get "in trouble". ...
Incomes taxes are more complicated for self-employed. You MUST keep very careful records to justify deductions. You must keep receipts. You must pay QTR tax payments.

Also, you are responsible for the full SS tax payment and for Medicare. Don't forget state, city, county etc. if applicable.

You can save a lot on your taxes as a free agent but you have to keep your records straight and "auditable" for it to work for you. A lot of stuff is deductable when you work for yourself.
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 11:16 AM   #11
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Re: Consulting vs. part-time w*rk

Very good point, I failed to mention that, and the fact that DW finds tracking everything to be easy and fun. I just had her back up her multi-megabyte excel workbook in multiple locations (CD, Drivehq.com) because when I asked her what would happen if it was lost, she simply replied "I would die!". She started the workbook in '99. I can tell you what we spent on gas in say, March of 2000.
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 11:37 AM   #12
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Re: Consulting vs. part-time w*rk

I consulted for 10 years. After the first year, it is clear sailing. Just keep all receipts. Better still, start out using Quicken to make it easy. Get some professional help the first time then do what they do. Most of the work is handled by Quicken.

Our auditors just take our Quicken records to produce the annual report to shareholders. You probably don't need that. We had our wives as shareholders so we could dividend out profits for income-splitting.
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 11:59 AM   #13
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Re: Consulting vs. part-time w*rk

Quote:
Originally Posted by kcowan
Just keep all receipts. Better still, start out using Quicken to make it easy. Get some professional help the first time then do what they do. Most of the work is handled by Quicken.
Quote:
Originally Posted by Laurence
her multi-megabyte excel workbook
Quote:
Originally Posted by SteveR
Incomes taxes are more complicated for self-employed. You MUST keep very careful records to justify deductions. You must keep receipts. You must pay QTR tax payments.

Also, you are responsible for the full SS tax payment and for Medicare. Don't forget state, city, county etc. if applicable.

You can save a lot on your taxes as a free agent but you have to keep your records straight and "auditable" for it to work for you. A lot of stuff is deductable when you work for yourself.
Yes - see, it's all of this stuff that scares me!!

Quote:
Originally Posted by scrinch
My advice to you is to, whether as consultant or part-timer, set up the working arrangement as flexibly as possible so that you can feel your way along and eventually settle on an arrangement that makes you the happiest. It seems like you're not doing this primarily for the money, but instead for personal rewards. So try to maximize those parts of the job that you find rewarding, and don't worry so much about the other things (money?).
scrinch - when I read this, it makes the most sense to me. You are right about my feelings on this. The work environment was always super-flexible anyway, so I'm not worried so much about that. And if it was about the money, I'd have been there long ago!

One additional thing: ex-boss said if I was a consultant, I wouldn't use up one of her open positions, but as a part-timer, even 2 days a week, I would take a position. But she said she'd rather have me 1/2 time than a new person full time. Maybe I'm just on an ego trip. (not)

Anyway, I appreciate all the input!!

CJ
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 12:41 PM   #14
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Re: Consulting vs. part-time w*rk

cj,

I'll chime in, too. I do consulting work now. Like your situation, it is all for one company. They'll send you a 1099 at the end of the year, you won't have to keep track of what you were paid by 15 different companies. All you have to do is track your expenses. I do a lot of travelling, and the 1099 I get shows every dime the company paid me, and as far as the IRS is concerned that is all income unless I prove differently. So, I keep track of the hotel costs, airfare, etc (which is not a problem--it's all on the travel vouchers anyway, right?) and that comes off the amount shown on the 1099.

I like consulting, it gives the "employer" and me maximum flexibilty. Yes, you'll have to pay self-employment tax (basicaly, both sides of the SS and Medicare taxes), so that adds another approx 8% to your tax bill. You can defer paying income taxes on a chunk of your self-employed income by opening a Solo 401K--that's the vehicle that offers the highest contribution amount in most cases.
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 12:51 PM   #15
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Re: Consulting vs. part-time w*rk

OK, samclem, that's also good info.

So all of you consulting veterans - what kind of expenses are we talking about? I will not be travelling, except to go to the office once or possibly twice a week. Is my trip to the office an expense? I'm guessing so, and parking or mass transportation. I'll use my home computer, but for a day or two a week, it will hardly be the "majority" of its use. What other kinds of things "count"?

Gracias!
CJ
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 12:55 PM   #16
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Re: Consulting vs. part-time w*rk

Yeah, what samclem wrote: a solo 401k is your friend.

Also: safe harbor. You pay what you paid last year.

Use eftps.gov to pay any quarterlies. It's simple.

You can deduct relevant books and subscriptions and software and a shiny new laptop, if you use it for business purposes.
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Re: Consulting vs. part-time w*rk
Old 02-16-2007, 01:32 PM   #17
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Re: Consulting vs. part-time w*rk

Yes, forgot to mention safe harbor, DW is just in her first year, but once we establish that first year taxes, she can just do the 110% thing next year and it will be even simpler.
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