Do I Need to Issue My Subcontractors a 1099?

"Do I need to issue my subcontract resume writers a 1099 form?"

If you use subcontractors in your resume writing business (or you've paid referral fees to any one resume writer in excess of $600), the answer is probably yes. And you'll have to act fast, because you must issue 1099 forms by Jan. 31.

Working with other resume writers can be a double-edged sword. On the one had, you can work with more clients than you can by yourself. But on the other hand, you have to deal with the extra tracking and bookkeeping. And come tax time, that means staying in the good graces of the Internal Revenue Service.

I'm going to use the general term "subcontractors" throughout the rest of this article, but the same principle applies to any resume writer who you pay more than $600 a year for services.

How the IRS Defines Subcontractors
Since your subcontractors aren't employees, you are not expected to withhold taxes from their payments. You simply pay the agreed-upon amount, and he or she is responsible for his or her own tax reporting.

But there is a catch.

Not only does the IRS want to know from the subcontract resume writer how much he or she earned, but they also want to know from the vendor (that's you) how much he or she paid to each subcontract resume writer. That's where form 1099 comes into play — but only if your subcontract writer meets certain criteria.

When is a 1099 Required?
On the surface, it's pretty easy to determine when to issue a 1099-MISC. If you pay a subcontractor (or other resume writer) more than $600 in a single calendar year, a 1099-MISC is required. The only exceptions to that rule are if you and/or your subcontract writer do not live in the United States, or if your writer's business is a corporation. Sole proprietors, LLCs, and partnerships are all subject to the 1099-MISC rule, provided the $600 earnings threshold is met.

The PayPal Gray Zone
If you pay your subcontract writers via PayPal payment, and you've made more than 200 payments (totaling in excess of $20,000), PayPal will ALSO be issuing a 1099-MISC to the IRS for your transactions. What that means for your subcontract writer is that they are potentially being reported twice — once by you, on a standard form 1099-MISC, and once by PayPal, on the new 1099K. You can see how this could cause some confusion, not only for you, but for the IRS as well.

To 1099 or Not?
If your subcontractor lives in the United States and earned more than $600 in payment from you during the year, he or she needs a 1099 form. As with all things involving taxes, however, it's probably best if you seek the advice of a qualified tax professional, rather than risk getting into hot water over missing or incorrectly filed forms. But do it today … since the deadline is tomorrow.

When You Have to Fire A Client

© Win Nondakowit - Fotolia.com

Last week on one of the resume writing association e-lists, there was a post from a resume writer who was looking for a way to fire a client. The client in question had initially negotiated a reduced rate for a pair of resumes (although I personally don't feel that two-for-one discounts are a good idea in the resume writing industry — we're not selling shoes here, people!) and then was attempting to further negotiate, by saying that he'd pay for his resume once he'd had a chance to review his friend's resume.

At that point, the resume writer realized the client was likely a PIA, and didn't want to work with him (or his friend) anymore. The writer was looking for a way to let the client down. My advice, keep it short and sweet: "Look, this just isn't going to work." Don't argue with them, or allow them to talk you into reconsidering.

One of the things I do for non-resume clients is media training. (Some of you were on my "Feed the Media: How to Get Publicity For Your Resume Writing Business" call, where I shared strategies for resume writers wanting more publicity.) The downside of working with the media is sometimes you'll be asked questions you don't want to answer. When I train clients, I tell them: Stick to your message point. Repeat it over and over again until the interviewer gets the clue that they're not going to get a different answer from you. (If you waffle, they'll eventually get you to say something that you regret; but if you stick to the same answer, eventually they'll get bored and move on.)

So when the client says, "But I want to work with you," you repeat, "I understand that, but I've decided we're not going to be able to work together." If they say, "But I've already spent (hours) on this," you respond back, "Yes, I've spent quite a bit of time on it too, and that's regretful. I'm refunding what you've paid, but I'm sorry, we won't be finishing the project together." You can either say the same exact thing ("This isn't going to work,") or rephrase it slightly. But don't give any wiggle room, and don't back down. If it didn't feel "right" to you to work with this person, it isn't going to feel any "better" to continue the relationship. I'm of the opinion that this is business, not personal. In your marriage, YES, you should definitely "work things out." With clients, I don't feel the same way. (Some say the definition of insanity is "doing the same thing over and over again and expecting different results." I'm not insane.)

I've had to fire my share of clients over the years. (By "my share," that's a handful of resume writing clients, and about the same number of clients in the "non-resume writing side" of things.) The reasons have been varied. There was the resume client who made me cry. (She was an attorney and was impossible to please. I held it together until she left the office, but she didn't walk out still a client. I fired her the minute she became verbally abusive.) I fired the client who came in smelling like pot. (My husband noticed that one, because I lost my sense of smell at age 15.) Sorry, I'm not going to prepare you for the interview only to have you fail the drug test. And this guy was in the Air Force!

It's not easy to fire a client ... but really, it is. As self-employed resume writers, we get to decide who our clients are — who we will, and will not, work with. Life is too short to put up with people who are disrespectful, take advantage of us, or who "change the rules" and then expect us to just go along with it. Even if you've worked with a client before, you have the right to say, "Sorry, not again."

On the non-resume side of things, I've had clients who I worked with who weren't a good fit, and eventually, my head caught up with my gut, and we would part ways. Other times, circumstances would change, and that would necessitate me saying, "sayonara." A few years ago, an association I had worked with for many years (they were one of the first clients of our business, in fact), had a change in leadership. The new board president became obsessed with wanting to draw up a new contract for our work with them. (They had been a client for about 10 years at that point, and were working off a contract from 2004 — including 2004 rates, which I didn't mind, because I enjoyed the work.) Long story short, the board came back with an 8-page contract (written by lawyers) that I just couldn't live with. It wasn't easy to say "Sorry, we won't be working with you anymore" — but really, given that contract, it was.

Because our client relationships require trust. And integrity. I won't (knowingly) include false information on a resume. I once turned down a LOT of money to write a bio for a guy who owned an "adult" store in town. (I didn't want my name on that!) If a client treats me (or anyone I work with) poorly, they're no longer a client. You may not feel that way about clients in your business. (One resume writer once said to me, "As long as their check clears, I don't care."). But that's not how I work. I believe you are known by the company you keep. (And I don't want to be featured on the 5 p.m. news as the resume writer whose client was fired for lying on his resume, and he blames me because I included false information when I knew it wasn't true. I will never be that person, because it won't happen [knowingly] on my watch.)

So trust your gut. Don't back down if a client challenges how YOU choose to operate your business. (There are some things you will hold sacred. Know those things, and don't waver — things like not taking clients on Sundays, or only accepting full payment in advance to start a project.) I've found that when I compromise on those things, it usually doesn't end up working out.

And when it doesn't work out, don't be afraid to cut the cord and say, "I'm sorry, but we're not going to be able to work together." Sometimes, it's what you've got to do. And sometimes it just feels good.

Resume Writers: Work Smarter, Not Harder

Every day, I correspond with (and talk to) resume writers who are working hard. They're working long hours, serving anywhere from a handful to a dozen clients each day, slaving over their keyboards as they work to deliver perfect prose that will win interviews and job offers for their deserving clients.

On the surface, they look like the swan paddling serenely across the pond. But underneath the surface, they are paddling frantically just to keep their forward momentum. Some of them are making big money — high five figures, even six figures. But it's coming at the expense of time with their family and friends, the constant stress of keeping up with client deadlines ... and, sometimes, their health.

One of the best ways to stop struggling with the "trading time for dollars" trap is to introduce passive income and recurring revenue systems into your career services business.

Although most clients find their resume writers online nowadays, the career services industry is unlike many online businesses. For most Internet businesses, working one-on-one with the business owner comes much later in the process, after the client has taken a series of smaller steps — for example, participating in a free or paid teleseminar, purchasing a low-price information product (under $50), or signing up for a group coaching or membership program. Instead, most resume writers go straight to what is typically a "back end" piece for most online marketers — "high dollar" one-on-one service. (That can be anywhere from $100 to $2000 for personal resume development services.)

One of the things I want to encourage you to think about is how you can work with prospects who come your way who aren't yet ready to work with you one-on-one. The answer can be incorporated into your business with passive income and recurring revenue products and services. Create products once and sell them over and over again … and, in the process, introduce prospective clients to you, and showcase your expertise.

If you think you'll "get around" to making these things, or that you don't have the time (or money) to make changes now, let me encourage you to start small. I saw this graphic yesterday on Jacqui Barrett-Poindexter's Facebook page, and it's perfect:

http://www.facebook.com/marymaninmorrissey

If you haven't yet had a chance to watch the "How to Create Passive Income and Recurring Revenue For Your Career Services Business" video, do it today! I recorded my presentation of the same name from the NRWA Conference in Charleston in September 2012! You can access it here for free until Feb. 1. (After that, it will only be available within the Bronze membership area of BeAResumeWriter.com.)

Want Referrals From Recruiters?

Developing an informal referral relationship with one or more recruiters can be a way to generate a handful of new clients each year. However, if you are serious about creating a steady stream of new clients sent your way by recruiters, you need to approach the recruiting firm with a proposal to create a strategic partnership.

This model positions you as a resource and income stream for the recruiting firm, whereas referral relationships (even when the recruiter is compensated for the referral), can seem like more of a one-way street.

Numerous resume writers have been approached by recruiting firms looking to add resume writing to their service offerings. The "Developing Strategic Alliances and Partnerships With Recruiters" special report is invaluable for resume writers who have been contacted about this type of opportunity. Not only will it give you a specific list of questions to ask the recruiting firm to help gauge whether this will be a good fit, but it also outlines issues to consider, systems and procedures to put in place to ensure the relationship works, and identifies the key considerations that should be put into a written agreement or contract.

Some of these include:

• Tracking referrals. How will you know when the client came from the recruiting firm?
• Compensation. Commissions for referrals range from $0 to 75%. How much should you offer?
• Scope of commissionable work. Most referral fees are based on the initial project scope only (usually a resume and cover letter) -- but it's wise to outline this specifically. What if the client comes back for a LinkedIn profile development, or resume retarget? Is a referral fee paid on these services? It depends on your agreement.
• Reporting requirements. Figuring out how and when referral fees are paid is critical.
• Contact information. Are you representing yourself as an agent of the recruiting firm? If so, how will this be handled? Will you have an email address that is tied to the recruiting firm's site, so it's easier to track where referrals come from? A special phone number? 

Also, systems and procedures are important. If you are going to be handling a high volume of referrals from a recruiting firm, you need internal processes that can support prospecting, handling leads, pricing projects, and converting them into clients. You'll also need systems for information-gathering, service delivery, billing, and project finalization. These systems must be scalable to support the increase in projects you want to handle. (And what if you get overwhelmed? Do you have methods for subcontracting projects or making referrals to other resume writers?)

"Developing Strategic Alliances and Partnerships with Recruiters" outlines five case studies of resume writers who have either been approached by a recruiting firm about a referral relationship, or who have initiated this contact.

For example, you can read about Angie, who has developed a referral partnership with a recruiting firm that targets the financial services industry. She pays the firm a small fee that is based on a percentage of each sale. Leads come from all over the country, and she receives 5-6 contacts per month, and converts approximately half of those to become clients. Angie estimates this arrangement contributes around 15 percent of her total revenue.

You can also check out these related blog posts:

• frequently-asked questions about developing referral relationships with recruiters (excerpted from the special report).
• How to find strategic partners and referral relationships
• How to determine what referral fee to offer to the recruiter

The "Developing Strategic Alliances and Partnerships With Recruiters" special report is just $27 and is available for immediate download. The information-packed 22-page report includes questions to ask to make sure the relationship will be a good fit, issues to address with the firm, systems and procedures you should have in place to support the referrals, how to increase the number of referrals you receive, what to put in your written agreement (contract), and frequently-asked questions.


TELESEMINAR FOR RESUME WRITERS INTERESTED IN THIS TOPIC:
Tuesday, January 27 at 1 p.m. Eastern
Details HERE.