Health Insurance & Tax impacting the American Consultant take home pay

This post is about unexpected costs that the American Government has brought to bear that are reducing the income of Consultant BAs in America.

If you work in America or thought of coming to work in America, certain changes over the past few years have really reduced the take home pay of consultants who are not self employed – known as W2 employees because of the end of year tax form received by employees.

For this post, I have assumed that the tax rate for the consultants income will be 30%.

To be self employed (known as 1099 – tax form produced at end of year for employees not directly employed), the client that you work for has to be willing to accept a Corp to Corp relationship and some clients will not accept that. If you are lucky you might be able to get a preferred vendor to hire you on self employed basis. At the end of the day, being able to work either W2 (employee) or 1099 (Self Employed) opens up the number of job opportunities that you can pursue.

How did we get to the point of losing money?

First off, Obamacare (Affordable Care Act) did not reduce the cost of health insurance for the majority. Instead, Obamacare has more than doubled the cost of health insurance since it was introduced – a $500 family policy in 2014 would cost around $1300 today based on what I have seen.

Obamacare also removed the ability to deduct private health insurance costs from your taxable income. Private health insurance was important for consultants as they change employers often. Buying into an employee policy did not always make sense as the relationship with the employer may be only for 3 months (duration of the contract). This private health insurance policy cost could previously be deducted against your taxes whether you were W2 or 1099. What Obamacare effectively did, was to get rid of that deduction option for W2 employees. This is like a 30% surcharge on health insurance because you now pay for the private health insurance policy with after tax income. 1099 employees can still deduct the cost of the health insurance against their income since the insurance can be deducted as a business expense. However, even if you are 1099, that does not overcome the fact that health insurance costs have more than doubled.

The second reason W2 consultants are losing more money is because of the tax law change of 2018. Previously if you had travel expenses that exceeded 2% of your W2 income, you could deduct that amount from your taxable income. This deduction was removed starting tax year 2018. This means that if you do any amount of heavy travel for work that your company does not pay you for, those travel expenses are now 30% more expensive. I spoke with a recruitment agency the other day who said that more and more consultants are declining W2 job opportunities that would require them to work out of their home town because of the tax law change.

If you are W2 and you need to travel for work overnight or longer, you could ask for “Per Diem”. This is a IRS approved amount that is not taxed and the amount is based on the location that you are working in. One way to negotiate this is to get an agreed rate and then ask for some of the income to be converted to Per Diem money. However there are flaws with this approach:

  • Per Diem expires after a period of time. Basically after your have been in a location for 12 months or you expect to be at a location longer than 12 months, the IRS no longer considers you eligible for tax free Per Diem.
  • You have to have a tax home more than 50 miles away from where you work.
  • The client or employer that you are going to work with may not want the hassle of doing Per Diem reporting.

In summary, the American system has started to close the door on W2 employees that are Business Analyst Consultants by increasing the cost to do business. Consultants will need to:

  • Pursue more Corp to Corp jobs (basically be self employed).
  • Work at reduced rates for companies that will cover their expenses.
  • Work only on local jobs that do not have expenses associated with them.

Self driving trucks increases risk of potential food and other consumables shortages

March 23, 2019 by · Leave a Comment
Filed under: General News 

As technological advances in the automotive industry bring us closer to the fully self driving vehicle on the roads, Governments would be wise to consider lessons learned from the airline industry. Business analysts should help advise our business partners on mitigating the risks.

Recent issue with Boeing 737 Max 8 highlights how a perceived software problem can kill people and cause a fleet of planes to be grounded from use. From a business perspective, airlines were lucky that they had other types of planes to use while the problem is worked on. Still, this was a tragedy that we all wish had not happened. We should use it as a reminder on being sure to understand the risks of any software we work on.

If we jump forward into the future where the delivery trucks on the road are all self driving. What will we do then if the self driving software is found to be flawed or hacked and requires trucks to be taken off the road? It might be days or weeks before the fleet can get operational again. This would leave food rotting in warehouses and docks as it was unable to be delivered to its final destination. This could lead to mass panic and civil unrest.

As a forewarning of the impact we might see, the cyber attacks of 2017 showed how information systems that organize the flow of goods were impacted. Shipping containers were unable to be moved to their destinations as the data required to manage the containers was unavailable. This lead to some temporary food shortages.

Self driving trucks, however take us into the world that actual physical transport is also at risk of being disabled. Even if we had a physical piece of paper showing us all the destination information for a shipping container, we would not have the means to move it. No manual work around. To avoid this risk, it would be good if self driving trucks at least have the following features:

  • Ability to disconnect the Self Driving brain from the truck.
  • Mechanisms to allow humans to control the truck directly in a manual form.
  • Retain physical security that allows authorized humans to manually drive and don’t rely on software security that may fail and prevent manual override.
  • Multiple vendors, with the theory that they won’t all fail at the same time.

If we want to look at history to see a previous example of when vehicles ground to a halt and how the problem was handled for the future, we can look at the Opec Oil embargo of 1973. Restriction of oil being sent to USA meant that fuel was hard to come by bringing traffic partially to a halt. Long term solution to avoid this problem in the future was for USA to keep its own strategic reserve of oil. One could argue for the need to keep sets of manually driven trucks on standby, spread throughout the country as a similar workaround.

As business analysts we should encourage our clients / business partners to weigh up the risk of their investments in new technology and help them to consider back up solutions at the same time. The old idiom of “Don’t put all your eggs in one basket” might be wise as software continues to replace even more manual processes. In some places it may be better to have multiple different solutions so that there is an alternative should one fail. Having a variety of planes has allowed the airlines to keep flying.

The more our technology solutions integrate with the infrastructure of the society we live in, the more need there is for a back up solution should a piece of technology fail. As business analysts we should not forget this.

Are we building the world defined by the movie “Gattaca”

March 14, 2019 by · Leave a Comment
Filed under: General News 

This post is about thinking how the project we are working on will impact the future of society as we know it. Quality of requirements we gather can impact society in ways later on that we did not think of. Most importantly, we need to always provide a secure back door where incorrect assumptions generated by computers can be overridden by humans otherwise we are at the mercy of the machines.

The 1997 movie “Gattaca” was about a person’s DNA being used to determine their potential in society. DNA would be used to work out what careers you would have access to. The protagonist of the story pays to use someone’s else DNA (adoption of identity instead of theft) to achieve their objective which currently they were banned from due to their inferior DNA.

If you think about the mechanics of the future life direction provided in “Gattaca”, it revolves around DNA having been previously analyzed to determine the career potential of a human being. Once the analysis was done, computers take control of processing an individual’s DNA to determine future worth to society. There is no need to have human involvement in the decision any longer as the formula is already developed and the outcome determined.

For those of us who work in IT we may encounter projects that are a cog in the works of this “Gattaca” future. These projects are efforts which seek to define a value for a human based on information received. Certainly at this point they are not focused on including DNA sampling to determine the value but that would seem to be only a matter to time. If we included DNA sampling that would give us the potential to look beyond the immediate prediction of value and include a future performance prediction as well.

Some of you may remember a 1995 movie called “The Net” where the issue was that the protagonist’s identity is erased causing her to have issues with doing anything in life. Having the computer store information related to our identity was the first step towards where we are now. What is significant in today’s world is how computers are adding points to that stored information that affect your value in society.

You may be asking at this point what IT projects that I work on would fall under this future “Gattaca” classification of determining human value? Below are some examples:

  • Human Resource systems – tracking of sick days and vacation days. Certain trends identified by the system can flag an employee as a risk.
  • Credit Scores. Speaks for itself and reliant on information that may or may not be correct.
  • Terrorist Name matching – how many Mr Smiths get delayed at the airport.
  • Computer Activity monitoring – not active enough and your employer can terminate you.
  • Grocery Store cards – are you buying healthy. Where does all that information go?
  • Job Interview software – companies are pushing more and more to remove the human from the initial interview loop and instead rely on a computer interview to screen applicants. Answer a question in the wrong way and you may never get passed the computer.
  • Job Search Engines – computer selects which resumes to be reviewed for potential interviews. If you don’t spend time trying to work out the current key words, your resume may never get viewed by human eyes.

Above just represents some of the projects that you may work on that determine the current value of a human. Underlying each one are formulas that are sold as: improvement in efficiency; reduction in costs etc.. for the organization that deploys the software. Side effect of course is that a computer now values the individual human based on the formulas used against the data received. While they don’t use DNA yet, they are certainly getting close.

We already know that in today’s world identity theft can give the stealing individual access to things that they would not have access to. That was the premise in “Gattaca” where the individual adopted another’s identity to achieve their goal. Identity theft would not be as easy if it were not for the computer storing points on an individual that determine their value to an organization and society thus opening or closing doors of opportunity. After identity theft, the victim may lose their place in society for a while if not permanently as their points total will be adjusted again by the computer based on the information generated by the identity theft. Victims are then tasked with reaching out to actual humans to correct what the computer is stating is valid. Humans tasked with correcting the information are at the mercy of the computers having a back door from which they can override the incorrect information.

So the next time you start to work on a project, ask yourself if you are building another “cog” in the “Gattaca” world machine and did you provide a secure back door override.