Offered a 1099 contract to leave programming job - Need advice

[alnoa]

Here's the break down, im a programmer(a little less than 5 years experience) in Seattle making a shade under 75K a year(I left a higher salary because of the insane hours). Im at a startup thats doing very well, so security is not really an issue right now and there is some "home run" potential. Overall, the place I work at is an 8 out of 10(which is good in my book).

I just got an unsolicted offer to do a 1 year contract at $70/hour. I initially turned it down, but my contact who gave me the offer asked me if I would be willing to do it if offered a bit more. Basically I think I could ask for 75/hour and maybe 80/hour(but the odds are against the latter).

My question is, for those who have done both, can you offer any insight into this?

The contact I mentioned stated that there is a good chance that this contract could be extended a couple of more years, and if he could bring on more business it could become a more long term thing. I've known this guy for a while so I sort of trust his outlook as far as the duration of the contract goes.

With no benefits, extra taxes, less security etc. Is it worth it? ANY advice would be great at this point. I've never done 1099 contracting before and although the tax topics have been informative, I would rather hear from someone who has been down this path before....

Thanks in advance, im absolutely agonizing over this decision.

 

[MrDudeMan]

i havent been there, but i dont think i would do it if i was already in a decent job and making good money. i would stick it out with your current company, build up a cushiony savings and maybe with more experience i would go somewhere else.

 

[Eeezee]

Hmm, that's a pretty interesting offer. Do you know what the conditions of the contract would be, and how will your work place rate from 1 to 10? If you're going to be happier there, you should take it.

There's just two things

1) If you stay with your current company, then you'll probably eventually get a raise the more you work there and you'll probably have good job security

2) If you take the contract, you can be pretty certain that you'll be out of work in a few years at most (at which point you'll have to find a new job) and no chance for a raise.

Do you prefer the same old routine or do you want something new?

 

[DAGTA]

I've done both. There is more risk and stress in most 1099 situations, however this is often more flexibility, too. Your taxes will go up but consider that $70/hour is equivalent to about $140,000 a year. Even with higher taxes, your take-home will be significantly more.

However, your current job pays well, too, so consider if you are willing to take a risk in a job with less security/stability.

 

[alnoa]

DAGTA! I have run across many of your posts in other threads.... Quick question, taking into account paying for my own medical, no paid vacation etc, increased taxes etc do you have a ballpark # as far as % of take home pay as a 1099 contractor?

Addressing other posters, I actually like the job I am doing now and the environment/culture. The draw to the 1099 gig is that i'll be more or less self employed, I get to work at home and not having definite hours(i.e. I can work an 11am to 9pm if I feel like doing that one day). The extra money is obviously the factor thats driving this though....

The guy who pitched it to me basically said, "look, you are going to make about twice what you are making and it will offset, medical costs and other benefits you are getting now", but I want to hear if people have run into some gotchas wit this sort of thing.

From the responses given, it seems that the offer is placing me squarly on the fence... I wish the answer was more obvious!

 

[MrDudeMan]

Originally posted by: alnoa
DAGTA! I have run across many of your posts in other threads.... Quick question, taking into account paying for my own medical, no paid vacation etc, increased taxes etc do you have a ballpark # as far as % of take home pay as a 1099 contractor?

Addressing other posters, I actually like the job I am doing now and the environment/culture. The draw to the 1099 gig is that i'll be more or less self employed, I get to work at home and not having definite hours(i.e. I can work an 11am to 9pm if I feel like doing that one day). The extra money is obviously the factor thats driving this though....

The guy who pitched it to me basically said, "look, you are going to make about twice what you are making and it will offset, medical costs and other benefits you are getting now", but I want to hear if people have run into some gotchas wit this sort of thing.

From the responses given, it seems that the offer is placing me squarly on the fence... I wish the answer was more obvious!

you are doing it for the wrong reason then. money will never buy you happiness, and after reading some more of your post, i think it would be a bad idea to leave a secure job that you actually enjoy for something much more risky. i hope it works out for you...it is nice to feel wanted and like you are really on top of things, but i feel like this decision would be a mistake a few years down the road if not done correctly.

you are right...there is no easy answer. what you must ask yourself is what is more important? making more money, probably only to spend more as well, or being happy and feeling secure in your job? you might be happy in the 1099 also but there will always be a lingering thought of "how long will this last?" and i couldnt deal with that.

 

[mitmot]

do the important thing:

do what makes you happy.

 

[Saint Nick]

Originally posted by: mitmot
do the important thing:

do what makes you happy.

i second this notion

 

[Adul]

Originally posted by: DAGTA
I've done both. There is more risk and stress in most 1099 situations, however this is often more flexibility, too. Your taxes will go up but consider that $70/hour is equivalent to about $140,000 a year. Even with higher taxes, your take-home will be significantly more.

However, your current job pays well, too, so consider if you are willing to take a risk in a job with less security/stability.

he speaks from experience

 

[erub]

so you would work from home? wouldnt that get kinda boring/lonely to be coding at a computer away from all human interaction for 8-10 hours a day? or maybe you programmers like it that way

 

[LordSnailz]

If you're still young and you think you can find a job relatively easy after the contract is over then do it. You should take more risk when you're young.

 

[Reel]

I had a bad experience doing contract programming. I personally would either get a really well-done contract to avoid the situation arising again or avoid it entirely. My situation arose from having an asshole boss that had no experience programming or managing a programming project. He came in and distracted us most of the time and constantly found "great new technology" that we had to incorporate. He would basically read the latest BS in some tech site and demand we incorporate it even if it didn't make sense to the goal of the project. It would take hours for me to explain to him simple concepts that anyone with a concept of basic data structures and algorithms would have understood. In the end, I got cut short about $2000 which is a lot to me right now because the guy interpreted the vague contract differently.

 

[habib89]

are you married and/or have children? if you're single and don't really need to worry about stability, go with the 1099.. it'll be a change of pace, and almost double the money.. you've got plenty of experience under your belt to find another job afterward, but it's not guaranteed that you'll have a job after a year.. with this company now, you get benefits, and are in an environment that you enjoy and is stable.. i have kids and i'm married.. i'd stay with the 75k, benefits and stability..

 

[alnoa]

I'm engaged and have no kids... I think if I was married with children I couldnt afford to take the risk.

"making more money, probably only to spend more as well"

Thats a good point, and never thought of it this way. My immediate goal was to pay off all of my remaining school loans, but I suppose there is a good chance that will happen. i.e. I'll end up doing things like getting a laptop when I can really do without.

The coding at home thing did actually worry me, my solution was that I would go to starbucks or other cafes and work there just to be around people a couple days a week(sounds kind of wierd huh?). My thinking is that if I worked at home exclusively, I would never see the light of day and eventually start mutating ;-).

Well guys, thanks for the input. At this point I think Im going to decline the offer, tuff as it may be. Unfortunately, I dont think I can be totally happy going either way, probably will always be a "what if" sort of thing.

 

[MadPeriot]

I have done both. I contracted and ran my own business with 1099 for two years and now working for the MAN. while contracting allows more flexibility, work from home, more stress due to marketing to get the next gig and keeping clients happy. Return of $$ is much more. The tax issue I think 1099 was much better than salary workers. You can write off almost everything, clothes, food, car mileage, travel, etc. Contracting jobs also leads to other oppurtunities as to working a regular job is just you know, regular. And at the end of the year you won't own as much. As to W2 there is no flexibilty in that they just take it out of your pay check every month. The reason why I went back to getting a job is because I just bought a house and need the stability. But I would do contracting > regular 8-5 job.

 

[MrDudeMan]

Originally posted by: alnoa
I'm engaged and have no kids... I think if I was married with children I couldnt afford to take the risk.

"making more money, probably only to spend more as well"

Thats a good point, and never thought of it this way. My immediate goal was to pay off all of my remaining school loans, but I suppose there is a good chance that will happen. i.e. I'll end up doing things like getting a laptop when I can really do without.

The coding at home thing did actually worry me, my solution was that I would go to starbucks or other cafes and work there just to be around people a couple days a week(sounds kind of wierd huh?). My thinking is that if I worked at home exclusively, I would never see the light of day and eventually start mutating ;-).

Well guys, thanks for the input. At this point I think Im going to decline the offer, tuff as it may be. Unfortunately, I dont think I can be totally happy going either way, probably will always be a "what if" sort of thing.

:thumbsup: for really thinking about it first. hopefully it will be for the best.

 

You will be better off staying at your current comfortable, well paying job at a start up with success.

 

[Law]

stick with current job please

 

[FoBoT]

hmm, tough one

are you benefits good or really good or just decent?

do you have a family or single?

i did a 6 month contract job @ $1000/week which was decent for my circustances, but after you pay taxes and health ins. etc etc it goes quickly

i would probably look at it from a career perspective, which path would be more likely to get you to where you want to be in 10 years

 

[WildHorse]

Well in California they call employment an "at-will" situation. Employer can dump you at-will, without cause, such as if they have a down year & need to lay off heads.

If WA's the same (I don't know) you're never really safe from getting cut from your employer.

But 1099 gigs can get terminated mid-stream too, which would leave you unemployed.

If the economy's down, getting a new job when the consulting gig ends could be a big problem.

I've heard of 1099 jobs where the principal ends up hiring some of the consultants. If you have a shot at that, maybe you could improve your situation that way.

Also, through the consulting job you'd improve your network of people connections, your skills, and your employability. It may lead you into a new career where you win jobs from the big consulting houses.

If the consulting didn't work out, then maybe your current employer would hire you back?

If you're young & without too many fixed obligations, maybe risk the consulting job.

If you support a family, or if you strongly think you'll cash in someday when they go public or sell out, maybe stay with your current job.

If you don't take the 1099 work, you could explore whether the consulting company might still use you for some part-time work on the side.

Really only you can decide the risk v. reward tradeoff between apparent safety where you are, or risk of venturing out. I find it helpful to make a decision tree.

 

[DAGTA]

Originally posted by: alnoa
DAGTA! I have run across many of your posts in other threads.... Quick question, taking into account paying for my own medical, no paid vacation etc, increased taxes etc do you have a ballpark # as far as % of take home pay as a 1099 contractor?

Addressing other posters, I actually like the job I am doing now and the environment/culture. The draw to the 1099 gig is that i'll be more or less self employed, I get to work at home and not having definite hours(i.e. I can work an 11am to 9pm if I feel like doing that one day). The extra money is obviously the factor thats driving this though....

The guy who pitched it to me basically said, "look, you are going to make about twice what you are making and it will offset, medical costs and other benefits you are getting now", but I want to hear if people have run into some gotchas wit this sort of thing.

From the responses given, it seems that the offer is placing me squarly on the fence... I wish the answer was more obvious!

Hey, sorry for the slow response... been gone all day.

I'll try to address several topics.

First, money:
Your health insurance will vary based on the plan you want, if you are covering others (family) and your health and age. I have the cheapest plan I could find with a reliable company. Mine runs $85 per month. I almost never go to an MD anymore so it's basically only for potential emergencies which is fine with me.

Your base tax rate is going to be your previous base tax rate + 15.3%. I think for you it would be about 25% (the 70,000 bracket) plus 15.3. However, if you take the contractor job, you'll be moving into a new tax bracket so it'll be a bit higher than that.

Deductions do come into play.
Keep a log of all of the miles you drive for your business. That's an expense.
Keep receipts of any hardware/software you purchase for this business/work.
Keep receipts of any meals consumed on the clock or in meetings with clients.

If you work from home AND you have an empy bedroom, make that room an office. You can then deduct it's portion of your rent/house payment as an expense.

For example: I rent a two bedroom apartment. One of the bedrooms is my office. That means I can claim 1/2 of my rent, electric bill, water bill, and cable bill as expenses. I also claim my cell phone since it's used for work.

The way claiming expenses works at the end of the year:
The tax laws say stuff like: "ok, you spent X amount ,but you can only use 30% of that X amount for this type of item" and so on. So you figure all those percentages and add up the total in deductions.

Then you take your gross income and subtract the deductions. That new amount... a form of 'net income' is the income you tax.

So, let's make an example:
Say you pull in 140,000 in 2006. When you figure all of your expenses, say you have 25,000 in expenses (it can fluctuate wildly depending on your business type and how you run it). So, you would calculate your tax rate (let's say 40.3%) based on the difference of those two numbers, or 115,000.

I'm sure other people can add more information. I've been doing this for a bit over two years now (my own business with a name and everything ) but I'm still learning.


As for other things:

Keep in mind that as a contractor you may be treated much worse than a full time employee. You are also viewed as easily expendable/replacable. You must make sure you prove yourself with the quality of your work.

You may take blunt and harsh comments from people all the time. They have no worries about talking that way to you. If you need software to develop a product, it's your responsibility to purchase and learn what you need.

You have no sick time. You have no vacation time. Anytime you take a day off, that's money lost.

Setting your own hours IS nice. However, be aware that it's very easy to fall into the procrastination trap or get accostumed to sleeping in and working nights... hindering your social life. As someone else mentioned, too... working from home alone does get lonely and you'll miss human interaction. However, it's also nice to have a 20' commute to work and be able to wear whatever you like, listen to your own music, and eat what and when you like.

There are definite pros and cons.

I think it's tougher for you than me because you have a relatively good paying job now and giving that up is a big risk. I walked away from a job paying me $38,500 to start my business so I had much less to lose. Yes, I have been making more than that every since I started the business, but there have been challenges.

If you have any other questions, please feel free to post them or PM me. I'll try to remember to check up on this thread.

Hope this helps!
-DAGTA

 

[DAGTA]

Oh, I should add: as a business/contactor, it's your responsbility to find work. Contracts finish and/or get cancelled, sometimes unexpectedly. When they end, you have no more income unless you have other contracts going.

I've had a large on-going contact with one company since I started this business. They pay me for 40 hours a week for them alone. However, I've also picked up other (smaller) contacts on the side that I work on during the weekends and some evenings. So, if the big contract were to be suddenly cancelled, I still have a small amount of income coming in while I find another large contract or a bunch of smaller contracts. I have found that I could pick up enough work to work 100 hours a week if I were capable of maintaining that without running my health into the ground.

I also like to see small businesses/new businesses succeed. Just a personal thing for me. As such, I'll often make a deal with people that are just starting new businesses and can't afford to pay me. If they have a service I like, I'll trade them. This has worked out very nicely in some ways. For instance, after a six hour meeting with the large client today, I headed over to North Phoenix where I received an hour long massage from a woman that has worked a trade with me. Hour for hour... each hour I work on her website, she gives me an hour of professional massage.