• Career Center

    Should You Be a Freelance CPA?

    By | March 9, 2015
    Companies like The Siegfried Group have been poaching people from accounting firms for years, offering them 10% raises and quarterly bonuses. But for many of you, there’s an even better deal than they can offer.
    If you work for just 3 months next busy season, can you make 75% of an employee’s annual income as a contractor?
    The answer is yes. Here’s an example using a good friend of mine was a Manager at Ernst & Young. He made $90,000 a year, then quit to start his own company. After about a year he decided he need to jumpstart his cash flow as starting a business takes time. He did that by negotiating a $90/hr rate including straight pay for overtime hours.
    Here are the financial details starting with his previous EY annual salary:
    Screen Shot 2015-03-08 at 1.01.19 PM.png
    This same concept applies to any level of accounting work; senior, senior manager, etc.
    Now, even though the calculation says ~66,000 and 75%, we all know how things work in public accounting — Deadlines get pushed back, clients stall, and what happens? You end up working even more hours.
    But unlike when you’re salaried, every additional hour is paid.
    My friend also got all of his travel, room, and food covered by the firm and would be traveling about 70% of the time.
    Admittedly, this strategy isn’t for everyone. If you want to make partner or become CFO of a sizeable company, paying your dues in Big 4 and jumping to a full-time position when you are ready is probably the best route. But that’s not the plan for most of us.
    Why would the firm go for an arrangement like this? Because it’s a lot cheaper than you think.
    Most of the revenue accounting firms make is during busy season. For the rest of the year, they are trying to find things for many of their staff members to do.
    With a contractor, they don’t pay benefits: no healthcare, no 401k contributions, minimal training, no internship, etc. Big savings for a firm.
    What’s the catch? Will you pay more taxes? As a 1099 contractor, you’ll be able to deduct business expenses and a carefully planned budget could reduce your effective tax liability to the same or less than what you would have as a full-time employee.
    Here are some other pros and cons of contracting:
    • More freedom
    • Increase pay by hour
    • Opportunity to organize your profit and loss statement
    • Less responsibility and pressure
    • Time to start your own business
    • Time to spend with your kids
    • Self employment tax
    • Lack of a clear career path
    • Lack of regular pay
    • Lack of investment from the firm into your skills
    • Potential for decreased annual pay
    • Likely to be put on challenging jobs
    Why would the firm go for an arrangement like this? Because it’s a lot cheaper than you think.
    So, is contracting the right move for you? Does anyone have any experience as a contractor for a CPA firm or other business?
    • Ed Flanders

      If you want some entertaining reading, check out the page for Siegfried Group on glassdoor.com. Half the reviews are horror stories while the other half are almost certainly fake reviews written by someone in upper management there.

      • Derrick Rose

        maybe SG paid GC for this post.

        • guest

          That was my first thought. I actually went back and looked for the term “Sponsored”.

          • Ed Flanders

            So you’re saying that SG paid HG to get on GC?

    • JessterCPA

      No chance this guy is only working 740 hours and taking the rest of the year off.

      I did a 1099 deal one year in March/April for a firm that really needed some help. Was a nice gig, in that I treated it (and they expected it) like a ‘job’, i.e. I came in right on time, left right on time, no pressure, no problems. I came in the office to a stack of 1040 returns at my desk, and came back the next day to a new stack. By far the easiest season I have ever had.

      Didn’t really make any more money than normal. But at least I worked and got some money.

      Contracting isn’t all it’s cracked up to be though. Work is great as long as you can get it.

      Also, I remember someone saying something like “Working for yourself is great, as long as you always want to work”

      • FartDude

        I don’t disagree with you, but I believe Argue said that this guy was contracting for one busy season to get a cash infusion for starting his own regular business (presumably, not one where he was working as a contractor).

        • JessterCPA

          Doh. I didn’t see that first time I read it.

    • Big4Veteran

      “Most of the revenue accounting firms make is during busy season. For the rest of the year, they are trying to find things for many of their staff members to do.”

      Are we talking about tax or audit here? If we’re talking about audit at a big firm, then I call bullshit on the above statement.

      • IndenturedServant

        i can call bullshit on the above for tax

    • FartDude

      You missed a big CON. You have to pay for your own insurance and other benefits that your employer would ordinarily provide.
      You also have the CON of being a contractor instead of an employee.

      • 080080

        That first con could be mitigated if the spouse is a regular 9-5er with good bennies for the family.

        • Chris


      • Ed Flanders

        Are benefits really that valuable?

        The Big4 used the recession as an opportunity to cut health insurance benefits substantially. Someone in their 20s could get a comparable Obamacare plan for ~$2k a year. If you have a spouse and kids though, you’re probably looking at closer to $7k a year.

        You don’t accrue any PTO as a contractor, but you wouldn’t get to take that during busy season anyway, and you’re already getting 8 months of unpaid vacation per year.

        The 401k match at the Big4 is a joke. As a contractor however, you can get a Solo-401k and contribute up to $52k a year, rather than just $18k as a full time employee.

        Am I missing anything major here? Seems to me that benefits have been slashed to the bone at the Big4 and by being a 1099 contractor you aren’t missing out on nearly as much as you think.

    • Big4Veteran

      Sorry to change the subject, but are Andrew Argue articles now going to be a regular thing on GC? Not that there’s anything wrong with it. It’s just that I’ve become accustomed to better.

      I think that GC has achieved a certain level of prominence/respectability in the accounting profession and I just don’t want to see all that get fucked up and this website turn into another one of these boring accountingtoday.com type joints that no one gives a shit about.

      • Chris

        I happen to think this article is well written. It’s actually broaching a subject that I’ve seriously considered myself

      • Ed Flanders

        It was either him or bringing back Bob Loblaw, and we all know how you feel about that guy.

        • billbrasskey

          Bob Loblaw’s Law Blog?

    • RG78

      Question :

      Why work as a contractor when you could essentially do the same thing by simply starting your own accounting firm?

      I can think of…resources being bigger, getting payroll setup, getting clients, and taking on more risk….but you pretty much have 8 months out of the year, right?

      By the time you reach senior, you are pretty much running an audit.
      By the time you make manager – you really are the last vestige of review, aside from some of the bigger items that partners want to put their word in over- but the manager/senior is actually running the show, while the partner is just making sure that what gets done is good enough for an opinion signature.

      Sure it’s more risk – but more risk = bigger profit.

      I’m not against the idea of contracting your services out, it’s essentially the same as a temp worker for the time, but I guess I just figure you could spend 8 months still hanging out, but do some client relationship development and making an even bigger buck…?

    • Shopisticated Investor 2015

      You always have to consider income taxes. With 90K a year, the firm atleast withholds taxes. When you freelance, yea your may get $66,600 but your tax payable is almost similar. At the end of the day you could be getting the cash flow as a second year for 3 months of work as a freelance CPA.