The Expert Edge

Senate Repeals New Requirement for 1099s

Today's guest author, Jim Lansing, of San Francisco Management Group, shares some timely information about a legislative repeal that is especially important to independent consultants and therefore to PATCA members.

First, some background. All independent consultants who have clients have had to deal with the 1099 MISC issued by their clients after year end if they have been paid over $600 over the course of that calendar year for their services. So, that is no surprise and an easy tax requirement to live with for clients engaging independent consultants as well as consultants themselves. 

However, when the Healthcare Bill was passed by Congress last year, it contained a provision requiring all businesses, including landlords, to submit a Form 1099 MISC to the Internal Revenue Service for every vendor from which they purchased $600 or more worth of goods or services during the course of the calendar year, starting in 2012. The idea was that such a requirement for  third-party reporting of income would make businesses less likely to try to hide income from the IRS. What a bureaucratic paperwork headache!

The effect of this new 1099 requirement on clients in having to file hundreds of 1099 forms during the year instead of just a few would likely have been to put a selective damper on the use of vendors. Since the 1099 requirement would not have applied to corporations, the pull on clients to use corporate consultants instead of independent consultants would have been strong.  

Now both the House and Senate have passed legislation to repeal this reporting provision of the Healthcare Law and the President is expected to sign it.

Most of PATCA's members are independent consultants, not corporate consultants, so it is with great relief that this latest threat to obtaining future business clients has been repealed.

Read more on:

Yahoo News

Washington Business Journal

PATCA Gets its Name in Inc.

PATCA is very excited to be recognized in the October 19, 2010 edition of Inc. Magazine: How to Get the Most out of Consultants. 

Here's a sample of the story, written by reporter Evan Klonsky:

"Consultants work hard to preserve longstanding, credible relationships with their clients to uphold their reputations. Suraiya Ahmed, president of the Professional and Technical Consultants Association, says that a consultant must also be willing to expand the horizons of your business. In essence, this means seeking to deliver beyond the task he or she is brought in to complete.

"What you're looking for is really a package deal," says Ahmed, who also founded Spectrum Insights, a consulting firm based in Union City, California, that specializes in small-company performance. "Not just a veteran consultant, but one who has either a network of connections or a bucket of expertise."

Read the full article here.

5 Ways the Small Business Jobs Act May Benefit Consultants

This week, President Barack Obama signed a bill to help small businesses expand and create jobs by cutting their taxes and establishing a $30 billion loan fund.

San Francisco Management Group consultant Jim Lansing, who heads up PATCA's Legislative Committee, has been investigating the story. Based on early research, Lansing has identified some "quick hits" that pertain directly to consultants, most of whom run small businesses.

Five ways this legislation may benefit consultants, directly or indirectly:

• Small businesses will be in a better position to hire consultants. Since these firms are likely to be cautious in the short term, they may hire part time employees and outside consultants for an interim period before adding permanent headcount.
• Greater funding sources will be available as options for management consultants who help clients package and obtain financing, allowing for more organizational consulting projects to proceed.
• Construction firms and other small business manufacturers will be able to make essential equipment purchases and qualify for a tax write-off more quickly. 
• The elimination of capital gains taxes on  many small business equipment purchases should eventually make more funds available to hire additional employees or project consultants.
• The new law provides that self-employed Americans can deduct all health insurance costs for themselves and their families. Previously, consultants could only deduct 50% of such costs.

Watch this space for continuing commentary on how the Small Business Jobs Act will affect consultants, self-employed specialists, and small businesses.

Submitted by Jim Lansing.

Rutgers Study Shows 40% of NY Contract Workers Have Trouble Getting Paid.

Crain's New York published some very interesting findings from a Rutgers University Study on NY freelancers. Reprinting some excerpts here, and we're very interested in sparking some commentary from PATCA. Your thoughts?

Author Daniel Massey writes:

"...The seemingly simple process of getting paid has emerged as the No. 1 problem facing self-employed workers. A first-ever study by a Rutgers University economist shows that 42% of the nearly 900,000 independent workers in New York state reported having trouble collecting payment for their labors last year, totaling an estimated $4.7 billion in lost wages."

"...More than 400 freelancers have electronically “outed” clients they say have not paid them—ranging from political candidates to banks to media companies—via a website set up by the Freelancers Union."

"...And a legislative push in Albany seeks to provide independent contractors—the fastest growing segment of the economy—with the same rights as traditional employees. Nationwide, half of all the new jobs added in the recovery are expected to be independent workers, according to the employment law firm Littler Mendelson."

House Passes Tax Cut for Small Business Investment

Good news came this week from Washington that may help consulting businesses to grow.

Yahoo News published an Associated Press story that included two interesting items: First, a new bill would increase tax deductions for start-up expenses by new small businesses (HR 5486). Secondly, there is a plan proposed to merge the bill with legislation creating a $30 billion fund for community banks to increase lending to small businesses (HR 5297).

The House may vote on the lending bill as early as today, and would then send the entire package to the Senate.

SBA and Comcast Partner to Provide Free Business Training

According to the April 2010 Comcast California  newsletter on goverment affairs, the U.S. Small Business Association (SBA) is partnering to deliver hundreds of courses to the public, televised "On Demand" to Comcast cable TV customers. These courses should be of great interest to consultants, since many PATCA members have little free time for keeping up with current government programs.

The course library will include programs such as "How to become a government-certified business," and will be geared towards helping small firms to grow and succeed. Courses will be available at the viewers convenience, so entrepreneurs can focus on developing their businesses during normal work hours.

Topics will be released monthly, and can be accessed on Channel 1. Select Get Local>Connecting Businesses>US SBA, to see the list of available courses.

(Note: Courses are free to Comcast subscribers.)

New State of CA Website to Cut Red Tape

This week, the state of California launched a new "Go ED" Economic Development portal site that streamlines the process of finding information essential to the business community, including consultants and small business.

From the San Diego Union- Tribune: The state of California on Thursday launched a “one-stop shop” to help businesses navigate the state government’s red tape and have quicker access to business-development services. Gov. Arnold Schwarzenegger, who signed the executive order launching the Governor’s Office of Economic Development, said it would help streamline government functions and “make the state an even better partner to the economy.” Learn more.

Proposal to Withhold 3% of Independent Contractor Payments Has Cal Chamber Fuming

This news just in from the California Chamber of Commerce:

"A proposal to require businesses to withhold 3 percent of payments to independent contractors amounts to an interest-free loan to the state from small businesses, the California Chamber of Commerce has pointed out to state leaders."

“We respectfully urge you to abandon this proposal,” CalChamber President and CEO Allan Zaremberg wrote in a letter to Senate President Pro Tem Darrell Steinberg (D-Sacramento), who has been quoted in news articles as expressing support for independent contractor withholding.'"

Senate Considering Bill Targeting Safe Harbor for Independent Contractors

Here's a post from Staffing Industry Analysts about a bill in the Senate that would cut back on a safe harbor for users of independent contractors. The bill was introduced by Massachusetts Senator John Kerry.

The Senate bill limits the criteria that establishes a reasonable basis for classifying a person as an independent contractor. This will affect the taxes paid by employers who work with contractors and consultants, and may influence their staffing decisions.

For the full story, see Staffing Industry Analysts "Bill Targets Independent Contractor Safe Harbor."

Services Sector Shows Steady Increases

It should come as no surprise to busy PATCA consultants that activity in the services sector has increased again in October. PATCA's member survey earlier in 2009 reported cautious optimism regarding future growth in consulting work, and economic indicators now show that growth has indeed occured.

According to JPMorgan's Global Services Business Activity Index, the upward trend continued in October, reaching a 22-month high. The report states that an increase in worldwide services activity has been noted for three successive months.

Additionally, growth of services activity in the US was very robust, reaching its highest point in two years and showing progress after the end of the recession in the third quarter. Countering the trend, there was a further reduction in employment during October, although the rate of job losses in the US is decreasing.

This phenomenon has been noted during previous economic cycles. As the economy starts to pick up speed, companies begin to hire contingent workers, like consultants. This is a great opportunity for PATCA members to reach out to new clients and to build stronger relationships with current customers.

The Conference Board Employment Trends Index (ETI)™ Edges Up in September

Reprinted from the Conference Board
Oct. 5, 2009

The Conference Board Employment Trends Index (ETI)™ increased 0.3 percent from the revised August number, the first increase since January 2008. The index now stands at 88.5 and is down 15.6 percent from a year ago.

"While the employment numbers reported by the government last Friday were certainly disappointing, The Conference Board Employment Trends Index™ suggests that the trend of declining job losses will continue," said Gad Levanon, Senior Economist at The Conference Board. "But the road to recovery is definitely going to be bumpy and may last unusually long, given the depth of the recession we have experienced."

This month’s increase in the Employment Trends Index™ was driven by a positive contribution from four out of the eight components... Read more.

AESC Report: Global Senior Executives Predict Economic Rebound in Early 2010

An interesting study was published by the Association of Executive Search Consultants last week. According to their poll, a large percentage of senior executives expect an economic recovery by the first half of 2010.

Excerpt:

New York – Results from a recent poll of global senior executive members of BlueSteps.com, conducted from 1 July – 12 August 2009, revealed that 48% expect the economy to rebound in the first half of 2010. Only 25% of those surveyed believe a recovery will occur in the second half of 2009, with 27% not expecting a recovery until the second half of 2010 or later.

72% of BlueSteps members responding to the poll reported having a neutral to positive outlook for the senior executive job market for the next 6 months, which supports a recent survey by The Association of Executive Search Consultants (AESC) where 64% of executive search consultants reported the same.

Read complete announcement.