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Old 03-28-2019, 05:16 PM
 
2,278 posts, read 3,531,025 times
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Just looking ahead in case an offer comes my way.


I will be retiring at the end of 2019 and there appears a chance that I will be offered a Post-Retirement position doing the same work I do now at my same employer. If so, the gross pay will be around $100 per hour, or around $200K for a full year. I am making a reasonable guess that I will be a 1099 employee.


From what I have found so far, a 1099 employee pays 15.3% for both parts (employee and employer) of Social Security and Medicare. My Federal Income Tax rate will be a blend of the 10%, 12%, 22%, and 24% rates based upon my anticipated final annual income. In addition, I will pay 4.6% Michigan Income Tax.


So assuming the blended Federal Rate is 20% after calculations, plus 15.3% for self-employment taxes, plus 4.6% for State taxes, my total 1099 payroll taxes taxes will be effectively 40%, making my "real" pay $60 per hour. Is this correct?
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Old 03-29-2019, 03:33 AM
 
706 posts, read 207,596 times
Reputation: 1338
Deductions!

Don't forget the standard deduction. And the 20% pass through deduction (subject to limits). You can open a solo 401k for deductible contributions. You do get a deduction for 1/2 of those SE taxes. You can deduct any self-employed health insurance premiums (and HSA contributions, if applicable). Not to mention any legitimate business deductions.

I'm self employed, and I make about half of what you are estimating. I pay about $16-17k in federal taxes.

I'd suggest actually filling out a 1040, including Schedule C, to get a true idea.
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Old 03-29-2019, 04:19 AM
 
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Quote:
Originally Posted by Lucy_C View Post
Deductions!

Don't forget the standard deduction. And the 20% pass through deduction (subject to limits). You can open a solo 401k for deductible contributions. You do get a deduction for 1/2 of those SE taxes. You can deduct any self-employed health insurance premiums (and HSA contributions, if applicable). Not to mention any legitimate business deductions.
Thanks!

No Health Insurance premiums as that is provided through my wife's employer. i hadn't even considered business deductions such as mileage, tools and equipment necessary for the job, professional memberships, etc. I also had no idea that I would be able to deduct half of the Self Employment Taxes.

This is why I am asking this question months in advance.
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Old 03-29-2019, 05:25 AM
 
335 posts, read 208,552 times
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Another factor to consider is the cap on social security. For 2019 the cap on SS is $132,900. So of the 15.3% you will pay 12.4% on $132,900 and 2.9% on the full $200,000.
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Old 03-30-2019, 09:42 AM
 
Location: North Idaho
21,812 posts, read 27,526,291 times
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There are additional Federal income taxes after you pass $100,000 a year. Don't forget those.
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Old 03-30-2019, 12:58 PM
 
2,278 posts, read 3,531,025 times
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Quote:
Originally Posted by oregonwoodsmoke View Post
There are additional Federal income taxes after you pass $100,000 a year. Don't forget those.
Say what?

Please elaborate as I have been above that threshold for nearly 20 years, even before I started using software to assist with 1040 preparation, and I have never seen that. Internet searches did not reveal it either.
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Old 03-30-2019, 01:57 PM
 
Location: OH>IL>CO>CT
5,038 posts, read 8,057,227 times
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1. Will you be collecting Social Security benefits while working as 1099 contractor ? If so, are you aware that those benefits would become taxable if other income is high enough ( 200K would definitely cause this).

See https://www.calcxml.com/calculators/...taxed?skn=#top

and https://www.ssa.gov/planners/taxes.html

2. Will you be on Medicare also ? If so, your premium for Parts B and/or D could be higher than base rate.

Read about

Part B IRMAA here: https://www.medicare.gov/your-medica...s/part-b-costs

Part D IRMAA here: https://www.medicare.gov/drug-covera...for-drug-plans
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Old 03-31-2019, 05:18 AM
 
2,278 posts, read 3,531,025 times
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No for SS. No for any part D, part of other Health Ins.. No for any Medicare for 18 months.
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Old Today, 04:04 PM
 
Location: SoCal
12,087 posts, read 5,745,184 times
Reputation: 8564
Make sure you have Solo401k or SEP IRA to reduce the income.
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