U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Work and Employment
 [Register]
Please register to participate in our discussions with 1.5 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Jump to a detailed profile or search
site with Google Custom Search

Search Forums  (Advanced)
Business Search - 14 Million verified businesses
Search for:  near: 
 
Old 03-26-2012, 05:26 PM
 
5,079 posts, read 4,705,710 times
Reputation: 1657
Default How to compare W2 wages versus 1099-misc. wages?

If my W-2 wages are X dollars per hour, how would my tax rate, and everything else, change if my wages were reported using a 1099-misc.?

Thanks
Reply With Quote Quick reply to this message

 
Old 03-26-2012, 09:22 PM
 
3,099 posts, read 2,200,558 times
Reputation: 4514
I'm no expert on this and they change a lot of tax rules each year (thus why I have a CPA), but the following is a start to learning more about this...

"Form 1099 series is used to report various types of income other than wages, salaries, and tips (for which Form W-2 is used instead). Examples of reportable transactions are amounts paid to a non-corporate independent contractor for services (in IRS terminology, such payments are nonemployee compensation)."
From...
IRS tax forms - Wikipedia, the free encyclopedia

Then here is more...
(Tons of links at the bottom.)
Independent contractor - Wikipedia, the free encyclopedia
Reply With Quote Quick reply to this message
 
Old 03-27-2012, 04:48 AM
 
4,932 posts, read 4,322,433 times
Reputation: 4923
Are you trying to compare a W2 job against a 1099 job?

Here are some big differences

1) 1099 you pay approx double the social security taxes vs W2. This is because you pay the employer's portion and the employee's portion on 1099 versus only paying the employee portion on W2. This is an extra 7% extra in taxes out of your pocket.

2) 1099 you submit federal taxes to the government each quarter for moneys earned. nobody is going to take out fed income tax, fica, fed or state income tax for you each pay period.

3) 1099 you deduct expenses from income and only pay tax on income.

4) no unemployment insurance paid on your behalf...if you are laid off, no unemployment to be collected for this job
Reply With Quote Quick reply to this message
 
Old 03-27-2012, 06:53 AM
 
Location: Chicago area
3,738 posts, read 3,950,411 times
Reputation: 5517
1099 is for self employed individuals and is typically for completion of a set project like a roof or web page etc. There are over 20 very narrow criteria that the IRS uses to determine if declaring a worker to be 1099 is legal. Many agencies and employers will try to declare their workers 1099 contractors to get out of paying payroll taxes.

If you have a boss that tells you what to do or have any resemblance of a job/boss type environment you need to be W2 and if they try to declare you 1099 fill out IRS form SS-8 and when you do taxes fill out for 8819 and do them as though you were w2. That is what I did though the IRS takes well over a year to decide these cases. I have yet to hear back.
Reply With Quote Quick reply to this message
 
Old 03-27-2012, 10:38 AM
 
8,681 posts, read 6,945,013 times
Reputation: 14874
Default You said "everything else," so here goes...

I'm a freelance writer. All of my income is on a 1099 basis.

MSchemist80 is right. The IRS uses very narrow criteria, so first, make sure you're in the right category.

[URL="http://www.businessnewsdaily.com/770-contract-vs-employees-what-you-need-to-know.html"]Contract vs. Employees: What You Need to Know | BusinessNewsDaily.com[/URL]

If you are a 1099er, you should set aside 30% of your income for federal taxes and pay it quarterly. Not sure about your state, but in New York, I set aside 6% for state taxes as well. This is on the advice of my accountant, whom I just saw last weekend.

This next part is very important if you are a 1099er and you want to be profitable: Because you pay both employer and employee on the Social Security tax, you pay for your own health insurance, travel, and supplies, and you pay for your own days off, you must offset all of that in your fees. My formula for my base rate is to find out what the hourly rate would be as an employee and double it. That's the base rate. The more complex the project and the more supplies and out-of-pocket expenses it will require, the higher my rate goes.

If you don't know the hourly rate, find out the standard industry salary for someone of your experience, education, and training for that position in your area. Divide that yearly salary by 2,080 to get the hourly rate, then double it. (The 2,080 = 52 weeks of 40 hours a week. Yes, all 52 weeks. As a contractor, you have to pay for your own vacation and sick days, too.)

Save every receipt for every business-related expense, right down to postage. Every time you go into Staples, it's a write-off, unless you're loading up on the trail mix or buying only computer games. Seriously. Need a light bulb for your desk lamp? Get it at Staples or another office supplier, not the grocery store. It's a better receipt and your accountant will appreciate it.

Also include:

--any professional memberships you have
--cell phone, landline, and any separate fees or plans for international calls
--the cost of licensing and certification in your state
--the cost of hosting your website
--the cost of any advertising or marketing you do, including business cards
--computer and computer programs, including your virus protection (doesn't matter what you do, white collar vs. blue collar, etc., chances are you use a computer to figure your billing, so right there you have the computer, accounting software, like maybe QuickBooks, Excel for spreadsheets, maybe Word for invoices if you hate QuickBooks invoicing as much as I do, or MS Office if you like Outlook--anything new that you buy or any upgrades that you buy that year)
--computer supplies (paper, toner, maintenance)
--relevant books or subscriptions (as a writer, I have to have the most recent editions of different style guides)
--your internet access
--car maintenance and mileage (a good accountant will also know whether and how to apply mileage)
--legal representation (for contract reviews, etc.)
--health insurance (HUGE write-off)
--tools specific to your trade or office space
--travel to and from clients, professional meetings, etc.
--your accountant!

Also, get separate accounts and credit cards for your business. A separate bank or credit union account is usually necessary to show proof of proprietorship when you go to buy health insurance, unless you go through a professional association or union (ie, the National Writers Union, a local of United Auto Workers, offers insurance on their group plan).

Small-business credit cards have nice services. For example, mine automatically categorizes each purchase or charge in an expense category, and it includes that on my statements. Come tax time, all I had to do was log in and generate a report, which I then downloaded to Excel. It actually listed a few small items that I had gotten online that I forgot about, which prompted me to go back into my email archives and print out the receipts.

As you can see, everything changes when you go into business for yourself. And it is a business. Whether you have a separate brick-and-mortar building, work solely online, or sit on your living room couch with a bird on your shoulder as you write, you are a business owner. Don't ever let anyone tell you any different, call you unemployed, assume that because you work at home that you're not working, blah, blah, blah. None of that. Contracting is a business. Treat it as such.

So, are you going to join us out here in being master of your own fate? It's a lot of work, but it's also very rewarding, and you can't get fired for goofing off on C-D or going for a walk if you need a break.
Reply With Quote Quick reply to this message
 
Old 04-23-2012, 01:17 PM
 
1 posts, read 38,266 times
Reputation: 11
Does anyone have or can recommend a calculator (Excel) for comparing 1099 - w2 including benefits?
Reply With Quote Quick reply to this message
 
Old 04-23-2012, 01:31 PM
 
Location: Chicago area
3,738 posts, read 3,950,411 times
Reputation: 5517
It is impossible to compare because you get a whole slew of deductions with 1099 that your can't get with
w2. When I filed as a 1099 I deducted my vehicle millage and when I refiled as a W2 with the standard deduction I only saved $788 on a $40,000 gross income.
Reply With Quote Quick reply to this message
 
Old 09-07-2012, 08:25 PM
 
441 posts, read 1,007,714 times
Reputation: 231
Quote:
Originally Posted by Yzette View Post
I'm a freelance writer. All of my income is on a 1099 basis.

MSchemist80 is right. The IRS uses very narrow criteria, so first, make sure you're in the right category.

Contract vs. Employees: What You Need to Know | BusinessNewsDaily.com

If you are a 1099er, you should set aside 30% of your income for federal taxes and pay it quarterly. Not sure about your state, but in New York, I set aside 6% for state taxes as well. This is on the advice of my accountant, whom I just saw last weekend.

This next part is very important if you are a 1099er and you want to be profitable: Because you pay both employer and employee on the Social Security tax, you pay for your own health insurance, travel, and supplies, and you pay for your own days off, you must offset all of that in your fees. My formula for my base rate is to find out what the hourly rate would be as an employee and double it. That's the base rate. The more complex the project and the more supplies and out-of-pocket expenses it will require, the higher my rate goes.

If you don't know the hourly rate, find out the standard industry salary for someone of your experience, education, and training for that position in your area. Divide that yearly salary by 2,080 to get the hourly rate, then double it. (The 2,080 = 52 weeks of 40 hours a week. Yes, all 52 weeks. As a contractor, you have to pay for your own vacation and sick days, too.)

Save every receipt for every business-related expense, right down to postage. Every time you go into Staples, it's a write-off, unless you're loading up on the trail mix or buying only computer games. Seriously. Need a light bulb for your desk lamp? Get it at Staples or another office supplier, not the grocery store. It's a better receipt and your accountant will appreciate it.

Also include:

--any professional memberships you have
--cell phone, landline, and any separate fees or plans for international calls
--the cost of licensing and certification in your state
--the cost of hosting your website
--the cost of any advertising or marketing you do, including business cards
--computer and computer programs, including your virus protection (doesn't matter what you do, white collar vs. blue collar, etc., chances are you use a computer to figure your billing, so right there you have the computer, accounting software, like maybe QuickBooks, Excel for spreadsheets, maybe Word for invoices if you hate QuickBooks invoicing as much as I do, or MS Office if you like Outlook--anything new that you buy or any upgrades that you buy that year)
--computer supplies (paper, toner, maintenance)
--relevant books or subscriptions (as a writer, I have to have the most recent editions of different style guides)
--your internet access
--car maintenance and mileage (a good accountant will also know whether and how to apply mileage)
--legal representation (for contract reviews, etc.)
--health insurance (HUGE write-off)
--tools specific to your trade or office space
--travel to and from clients, professional meetings, etc.
--your accountant!

Also, get separate accounts and credit cards for your business. A separate bank or credit union account is usually necessary to show proof of proprietorship when you go to buy health insurance, unless you go through a professional association or union (ie, the National Writers Union, a local of United Auto Workers, offers insurance on their group plan).

Small-business credit cards have nice services. For example, mine automatically categorizes each purchase or charge in an expense category, and it includes that on my statements. Come tax time, all I had to do was log in and generate a report, which I then downloaded to Excel. It actually listed a few small items that I had gotten online that I forgot about, which prompted me to go back into my email archives and print out the receipts.

As you can see, everything changes when you go into business for yourself. And it is a business. Whether you have a separate brick-and-mortar building, work solely online, or sit on your living room couch with a bird on your shoulder as you write, you are a business owner. Don't ever let anyone tell you any different, call you unemployed, assume that because you work at home that you're not working, blah, blah, blah. None of that. Contracting is a business. Treat it as such.

So, are you going to join us out here in being master of your own fate? It's a lot of work, but it's also very rewarding, and you can't get fired for goofing off on C-D or going for a walk if you need a break.
FABULOUS post, Yzette! Tried to give you "rep", but C-D says I need to spread it around.
Reply With Quote Quick reply to this message
 
Old 04-12-2013, 05:32 PM
 
8 posts, read 72,937 times
Reputation: 22
Excellent post Yzette!

Simplified general rule: taxes are about 7.5% higher for 1099.

Minimum amount needed to cover extra taxes for 1099 is to add 7.5% to normal w2 rate. You need more to cover your expenses, sick days, etc. Employers will pay more, so for 1099 increase the asking rate to 40-50% above normal w2 rate.

Basic Calculator for converting W2 to 1099 rates

W2: $30.00/hr
1099: $32.25/hr min
1099: $45.00/hr max

W2: $35.00/hr
1099: $37.63/hr min
1099: $52.50/hr max


W2: $40.00/hr

1099: $43.00/hr min
1099: $60.00/hr max


W2: $45.00/hr

1099: $48.38/hr min
1099: $67.50/hr max

W2: $50.00/hr

1099: $53.75/hr min
1099: $70.00/hr max

W2: $55.00/hr
1099: $59.13/hr min
1099: $82.50/hr max

W2: $60.00/hr
1099: $64.50/hr min
1099: $90.00/hr max

W2: $65.00/hr
1099: $69.88/hr min
1099: $97.50/hr max

W2: $70.00/hr
1099: $75.25/hr min
1099: $105.00/hr max

W2: $75.00/hr
1099: $80.63/hr min
1099: $107.50/hr max

W2: $80.00/hr
1099: $86.00/hr min
1099: $120.00/hr max

Hope this helps!

Last edited by hw15; 04-12-2013 at 06:05 PM..
Reply With Quote Quick reply to this message
 
Old 04-26-2013, 11:51 AM
 
8 posts, read 72,937 times
Reputation: 22
Default Hourly to Salary Calculator

As an extension to the above post, here are some numbers to compare hourly vs. annual earnings.

Basic Calculator for converting W2 hourly to salary rates.

$30.00/hr = $60,000/yr

$35.00/hr = $70,000/yr

$40.00/hr = $80,000/yr

$45.00/hr = $90,000/yr

$50.00/hr = $100,000/yr

$55.00/hr = $110,000/yr

$60.00/hr = $120,000/yr

$65.00/hr = $130,000/yr

$70.00/hr = $140,000/yr

$75.00/hr = $150,000/yr

$80.00/hr = $160,000/yr

These are very rough estimates, but will give you an idea. As you can see, every $5 per hour equates to about $10,000 per year.

Hope this helps!

Last edited by hw15; 04-26-2013 at 12:03 PM..
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:


Over $79,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Work and Employment
Similar Threads

All times are GMT -6.

2005-2014, Advameg, Inc.

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25 - Top