90k w2 v.s. 120k 1099

[steppinthrax]

So I interviewed for a remote (work-from-home) position with a company. This would be a second job. When talking salary he indicated he can either do 90K W-2 or 120K 1099 (based on my salary req). I've never done 1099. I did some reading that I would have to set aside 40% for taxes!!!!!! I also have to pay taxes quarterly. My suspicion is the amount of headache, It won't be worth it. My second suspicion is I won't use any of their benefits so the w-2 would be a waste. I'm calculating I would be roughly at 260K a year.

My other understanding is you can pretty much deduct everything under the sun, to a point where your taxes are low?

Has anyone here done 1099?

 

[Capt Caveman]

:biggrin:

 

[smackababy]

I've done it for short contracts. It really isn't that much of a hassle. You know how much you will be making, so putting that tax aside in a savings account isn't too bad.

I didn't work from home, so I can't comment on deductions or itemization.

If this is a second job and you don't need the benefits, there is no reason to take the W-2 and take them.

 

[PenguinPower]

I love that he seems to be nonchalant in presenting this choice to you...I hope he understands there are legal tests that need to be made before making someone an IC.

 

[steppinthrax]

I love that he seems to be nonchalant in presenting this choice to you...I hope he understands there are legal tests that need to be made before making someone an IC.

????

Explain.....

 

[NoTine42]

You should probably consult with a tax pro

The self employment tax (social security + Medicare) is 15.3% on the 1st $113,700 of income.. (And 2.9% after that).
If you get a W2, your employer pays 7.65% of that.

If your 1st job satisfies all of your $113k then the 1099 might be attractive.

 

[CPA]

I love that he seems to be nonchalant in presenting this choice to you...I hope he understands there are legal tests that need to be made before making someone an IC.

This.

There are tests that the IRS can use to determine if you have an employee/employer relationship or contract/employer relationship. Read this.

 

[PenguinPower]

????

Explain.....

You have to look at the degree of control the business has over the person in terms of behavioral and financial aspects. There's a 20-factor test that used to be used by the IRS to assist in that.

 

[IndyColtsFan]

Oh look, another TommyGT....errr, I mean, steppinthrax thread. You do know that you can get fired for working your "second" job while on company time, right?

 

[steppinthrax]

Oh look, another TommyGT....errr, I mean, steppinthrax thread. You do know that you can get fired for working your "second" job while on company time, right?

Actually my current employer doesn't care if I work a second job. I spoke to him previously about this and he was OK with it. I'm already on a second position, but leaving this for this better second position.

 

[Newell Steamer]

120K,.. you must be applying for a part time job then? Or an entry level position at a retail store?

 

[smackababy]

You have to look at the degree of control the business has over the person in terms of behavioral and financial aspects. There's a 20-factor test that used to be used by the IRS to assist in that.

You, as in the employer, not the employee. I don't think he will get in trouble with the IRS if the employer considers him self employed, when he really isn't, as he has no decision in the process of how he is to be paid.

 

[IndyColtsFan]

Actually my current employer doesn't care if I work a second job. I spoke to him previously about this and he was OK with it. I'm already on a second position, but leaving this for this better second position.

Oh, so your boss said it was "OK" to work your SECOND job on company time (please reread what I wrote)? I'm going to call shens on that.

 

[steppinthrax]

Oh, so your boss said it was "OK" to work your SECOND job on company time (please reread what I wrote)? I'm going to call shens on that.

My boss is concerned that the job gets done. That's pretty much what he told me. If that's and issue that my 2nd job will become an issue.

 

[RelaxTheMind]

how financially disciplined are you?

 

[steppinthrax]

how financially disciplined are you?

I don't haphazardly spend my money on shit (cars, jewelry, etc...) if that is what your talking about.

 

[IndyColtsFan]

My boss is concerned that the job gets done. That's pretty much what he told me. If that's and issue that my 2nd job will become an issue.

If I had an employee that came to me and asked to work a second job while he is supposed to be working a job for me, here is what I would think:

1. This employee probably doesn't have enough to do.
2. This guy is going to work at a similar job to the one he has and likely will use the work he does here for that second job and get paid twice for it.

I'd probably have to debate on whether I fired you on the spot or if I'd just load you with more work. Your boss is an idiot, sorry.

 

[PenguinPower]

You, as in the employer, not the employee. I don't think he will get in trouble with the IRS if the employer considers him self employed, when he really isn't, as he has no decision in the process of how he is to be paid.

Um...right. That's why I said I was surprised that the employer was being nonchalant about it.

 

[steppinthrax]

If I had an employee that came to me and asked to work a second job while he is supposed to be working a job for me, here is what I would think:

1. This employee probably doesn't have enough to do.
2. This guy is going to work at a similar job to the one he has and likely will use the work he does here for that second job and get paid twice for it.

I'd probably have to debate on whether I fired you on the spot or if I'd just load you with more work. Your boss is an idiot, sorry.

Which tells me your the type of boss that concentrates on the nitty gritty other than the bottom line. If an employee is doing good work, is valuable and has a good skill set they are going to be marketable. This is DC not Wyoming, TN or IN you have 1099, corp to corp, consultants etc....

 

[steppinthrax]

120K,.. you must be applying for a part time job then? Or an entry level position at a retail store?

Yeah i know in NYC 120K is toilet paper expense.

 

[postmortemIA]

Duh clearly 120k or you'll be making only 230k total.. that is too far from top 1% earners

 

[IndyColtsFan]

Which tells me your the type of boss that concentrates on the nitty gritty other than the bottom line. If an employee is doing good work, is valuable and has a good skill set they are going to be marketable. This is DC not Wyoming, TN or IN you have 1099, corp to corp, consultants etc....

BWAHAHAHAHAHAHA!

I've probably been a consultant longer than you have and I guarantee I've had a longer career including management positions. You do not let employees work for other people on company time and with company resources (unless, of course, your company has a contract for your services with that other company). Your boss isn't focusing on the "bottom line" whatsoever and if I were his boss, I'd fire both of you.

 

[CurseTheSky]

Yeah, this whole situation just spells disaster at some point in the future. Let's put it this way - if they can afford to knowingly have you, no matter how good you are, work for another company while on their time, then one of the following is true:

A) the company is being mis-managed and will collapse sometime in the not-too-distant future
B) someone will have a sudden change of heart and you may find yourself without the primary job
C) the machine that is this company runs on the blood of orphans and unicorn tears; there is no other way.

I'm not trying to be insulting, but trust the advice you're getting here - something is too good to be true.

 

[IndyColtsFan]

Yeah, this whole situation just spells disaster at some point in the future. Let's put it this way - if they can afford to knowingly have you, no matter how good you are, work for another company while on their time, then one of the following is true:

A) the company is being mis-managed and will collapse sometime in the not-too-distant future
B) someone will have a sudden change of heart and you may find yourself without the primary job
C) the machine that is this company runs on the blood of orphans and unicorn tears; there is no other way.

I'm not trying to be insulting, but trust the advice you're getting here - something is too good to be true.

Bingo.

steppinthrax, your boss may have told you to do it, but I'd wager his higher-ups wouldn't agree and if/when they find out, you'll be the one thrown under the bus. There are MANY legal and business reasons why this is not allowed.

 

[Apple Of Sodom]

I have both w-2 and 1099 income.

1) You do need to pay quarterly taxes. Your CPA will, after your first year, give you an estimated quarterly tax payment plan and you just send the IRS a check. It is fucking simple.

2) If you already have an employer paying social security and medicare (up to the limit) then you will not need to worry much about self-employment tax.

3) There is nothing magical (other than self-employment tax) abour 1099 income. Figure out your tax bracket and put some aside for taxes.

4) With 1099 income you can start a SEP IRA and squirrel away 25% of your income before taxes (up to $52K I believe.) This means you could put $30K away.

5) Be careful with household deductions and that stuff. Don't raise red flags, like deducting 25% of your house, 100% of your internet, that type of thing.

EDIT:

No, you don't have to save 40% for taxes. Figure out your tax bracket and save that amount, plus self employment tax if necessary.

No, you can'd deduct everything under the sun to the point your taxes are low. The job doesn't sound like it requires travel, so no car or mileage deduction. No meal deductions. You get to deduct a PORTION of other bills. For example, if 10% of your home is DEDICATED to the business (this does not mean a living room with a laptop...this means a dedicated area that is NEVER used for personal reasons, only business) then you could deduct 10% of your heating bill, electric bill, etc.