When designing a flexible work proposal, be sure to think through the issue of employment status. Knowing how it affects you will help you negotiate. I’ve worked part-time as an employee and as an independent contractor, and each capacity has its benefits and drawbacks. The choice hasn’t always been mine, but I will say that being an employee was a good fit when my kids were young. Having my employer handle taxes and benefits was one less thing I had to manage in those early days! I’m currently an independent contractor. It involves more planning, but I appreciate the autonomy and getting to make decisions for myself.
Overall characteristics
Attorneys know how employees differ from independent contractors from a legal perspective, but let’s look at how employment status could affect you personally.
An independent contractor (IC) is considered a self-employed solo practitioner. As an IC, you are generally responsible for your own taxes, health insurance, retirement savings, and professional expenses. This responsibility comes with the freedom to make decisions. You can choose your own type of health care plan, retirement plan, professional organizations and CLE, for example. An IC can accept work from multiple law firms and individual clients, so long as there is no ethical conflict.
An employee typically has one employer law firm, and the firm handles taxes and most benefits. Your ability to accept clients or accept work from other firms depends on your employer. Your employer may also have preferences about your membership to professional organizations and the type and subject matter of CLE you take. BEWARE: Reduced hours may affect your ability to qualify for an employer’s benefits. For example, health insurance underwriting requirements may dictate a certain minimum number of weekly hours. It’s important to ask about the qualifications for employee benefits so you don’t inadvertently give them up by reducing your hours. You may not always have a choice about employment status, but if you do, consider your professional goals and how much responsibility you want to maintain. Also, be sure financial obligations are factored into your salary negotiations. To do that, you may find it helpful to review my prior blog post on “Let’s Talk Numbers.” It discusses how to account for expenses you bear personally, such as health insurance.
Federal income taxes
On our joint federal tax return, my name and social security number are listed first because I handled our taxes for the first 15 years of our marriage. (And every year, my husband forgets and tries to sign his name first—not so fast, bucko!) Once our finances started to get more complicated, we enlisted an accountant. Now, the accountant’s check is one of my favorite payments of the year. What a relief to have help and the reassurance that it’s done right!
As you know, employers withhold federal income tax, social security tax and Medicare tax amounts from an employee’s gross wages, and the employer bears the burden of making those payments to the IRS. Employees can adjust the amounts withheld to account for their projected tax obligations. Employees receive net wages as pay. The W-2 statement that an employer sends at the beginning of each year reflects the information needed for filling out tax returns. In contrast, an independent contractor (IC) receives gross wages from each law firm for which she works. An IC submits a W-9 form to each payor and receives a 1099 form from each payor at the beginning of the calendar year for reporting wages. She is personally responsible for withholding and paying taxes from those gross wages. Translation: Save money from each paycheck! Estimated tax payments need to be made to the IRS on a quarterly basis. (DO NOT SKIP THIS STEP. YOU WILL REGRET IT!) The estimated tax covers your federal income tax, social security tax and Medicare tax obligations. Trust me, when tax season comes around, you’ll be glad you set aside money from each paycheck and kept up with those quarterly payments! You can estimate your quarterly taxes using the IRS form 1040-ES.
State income taxes
If you live in a state that taxes your income, be sure you understand the method and amounts paid to the state so you know your responsibilities. My state of Texas doesn’t have an income tax. Instead, it’s a tradition to moan and groan about the amount of property taxes we pay!
Other considerations
Future blog posts will include more specific information about benefits and professional expenses, so stay tuned.
How would you flex?
If you could choose between being an IC or an employee, what you choose and why? Let’s hear about it!
FlexWork for Attorney Moms 
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