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Old 06-03-2010, 02:32 PM
 
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Default Contracting: salary diff's between W2, 1099, etc?

Wasn't sure where to post....

Anyone who knows about this would appreciate clarification, as it appears (for ex) 50K as a regular employee or contractor isn't the same as the others, partly because the others don't include benefits.....but there's more. eg with W2 or 1099 (forget which) your taxes aren't taken out, you have to pay them yourself come tax time. For some reason that means you typically make a lot more with one vs the other, but why? You're paying taxes either way.

General info/clarification appreciated...
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Old 06-03-2010, 02:48 PM
 
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Quote:
Originally Posted by joey2000 View Post
Wasn't sure where to post....

Anyone who knows about this would appreciate clarification, as it appears (for ex) 50K as a regular employee or contractor isn't the same as the others, partly because the others don't include benefits.....but there's more. eg with W2 or 1099 (forget which) your taxes aren't taken out, you have to pay them yourself come tax time. For some reason that means you typically make a lot more with one vs the other, but why? You're paying taxes either way.

General info/clarification appreciated...
i've done both...

factoring in benefits plays a pretty big role when comparing money earned as an employee vs self employed, especially if you're married with kids.

but when you say you typically make a lot more with one vs. the other, isn't exactly true. really, the only difference is benefits, which depending on what level you're at being an employee could vary a great deal.

getting a 1099, or being self employed, you pay your taxes quarterly. if you have health insurance, premiums are deducted from your pay...as many other expenses could as well...

if you don't mind elaborating a little, maybe we could clarify exactly what you're wanting to know...
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Old 06-03-2010, 03:42 PM
 
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Well it seems all things being equal, companies offer a diff salary depending on how you're hired - I was trying to figure out the monetary diffs in each, eg if I make say $50K as a "regular" or contract employee (ie with standard bennies), what would that reasonably or realistically translate to if instead hired as:

W2
1099
Corp2Corp

? Basically when someone says they have a position avail for me, I'd like to know the "translation" so I know to realistically ask or expect salary wise.
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Old 06-03-2010, 04:01 PM
 
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For starters, as a 1099 employee you'll need to pay both sides of your social security taxes. A second consideration is the unemployment insurance premiums they'll be saving. After that, you'll need to factor in the loss of health insurance, vacation time, 401K match, lack of paid breaks, etc.

A final consideration is the additional time and money you'll need to spend on paperwork, accounting, accounting fees, tracking your own mileage, home office deductions (like computers, ink, etc.), providing your own tools, and any other expenses you'll incur that the company would normally be responsible for.

My general rule of thumb is to charge twice as much to work as a 1099 as I would charge to work as a W2, but not everybody can get away with that much of a difference.
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Old 06-03-2010, 07:33 PM
 
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Wow - I'd say not What of all that differs with W2?
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Old 06-04-2010, 09:30 AM
 
Location: WA
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I have worked numerous contracts as well as jobs. Although the assignment, employer, and rate will make a big difference I estimated the 1099 contract dollars were worth half of what professional full time employment was worth.

Not only do you pay both sides of taxes and lack easy to identify benefits like health insurance, you also have to monetize what holidays, vacation, life insurance, pension, and job flexibility / security is worth. Contracts with an hourly rate equivalent to $250K a year when multiplying for a 40 hour week may really be worth no more than a good $100K job.

More people than ever work on contract today with less security and less total compensation than recognized.
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Old 06-04-2010, 09:41 AM
 
Location: home state of Myrtle Beach!
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Though you do pay both sides of your social security taxes when you file your tax return you get a credit for half of it; so 1099 puts a burden on the country as a whole too.
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Old 06-04-2010, 10:29 AM
 
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in my field w2 contractor(using a someone's corp admin + few benefits) is about $115/hr net(minus middlemen) and 1099 is $135/hr net(minus middlemen). that needs to be adjusted depending on the professional insurances required or provided by a passthru corp
from what i read so far i think a 1099 has more tax deferred investment options while passthru corps dont even offer
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Old 06-04-2010, 12:49 PM
 
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Quote:
Originally Posted by cdelena View Post
Not only do you pay both sides of taxes
? "Both sides?" Sorry lost me.

I think this half/double thing is a bit high though. eg for let's say a $52K guy (ie $1K a week) - some of these are ballpark and can obviously vary, but annual expenses:

health ins = 3K
life ins = 1K
3 weeks vacation = 3K
1 weeks' worth holidays = 1K
401K (est) = 3K

So there's 11K, meaning a $52K salary guy would need $63K as 1099 or W2.

The gap appears to be taxes, which are taken out either way, so I'm not getting the diff, for ex. this "both sides" thing-?
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Old 06-04-2010, 01:27 PM
 
Location: home state of Myrtle Beach!
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On W-2 your employer pays half of your social security taxes and you pay half; on 1099 you pay it all; but you get a credit for half of that when you file your tax return.
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