New job offer

[AfterBurners]

I just got offer a job to work on a one year migration project ' upgrading end user's systems and working as a contractor on a 1099. I never done this before and it was always a W2 and I had direct deposit. Everything was taken care of. I'd claim Single 0 and had no issues. Now I have to pay mt taxes directly to the IRS at the end of the year. Has anyone been on a job where you had to do the same? Is there any advantages or disadvantages? Do they (the IRS) tax you more because of this pay option. Are there special forms to fill out?

I'm not too pleased with this idea and I would much rather have that all taken care of and get my refund check at the end of the year.

 

[DuctTapeandRocketFuel]

I have done that before. Taxes should be the same as when your employer does when on a W2. If the company does not reimburse you for business expenses, then you will need special forms to claim on your taxes. Don't lose your receipts. I paid a professional tax service to handle that for me the one year I was on 1099. I don't like paperwork.

 

[cavecentral]

I did some 1099 once. Bought a new computer and expensed it at the time to offset some of the cost (valid given it was computer programming work).

Still, you gotta sock aside some serious cash as you are paying your taxes plus the portion normally paid by the employer. I too had another prepare my taxes.

 

[AfterBurners]

It seems like a hassle if you ask me. Why do companies do that. I could see if I was actually working for myself and had my own business / service, but this is a company who is hiring me.

 

[fyrwrxz]

Dan- It's the whole LLC concept. Minimum involvement (expense) with the hired guns. All that's really different is you are responsible to document all costs to you, deductible via IRS laws. I learned the ropes from professionals who literally travel the world doing this. The real trick is to find a CPA or tax pro whom you are comfortable with, unless you are a real anal, OCD tax geek. PM me for more info or hit my regular e-mail. This can be lucrative. It's a Dead Man's Party-leave your conscience at the door....

 

[jderimig]

Intersesting legal can of worms. The company is hiring you as a contractor to avoid direct employee expenses. However, this is not legal if the majority of your compensation comes from this single entity. However this irs rule is widely violated.

It gets worse, if the majority of your income comes from 1099 then you may have to pay estimated taxes quarterly.

See a tax accountant.

 

[AfterBurners]

Intersesting legal can of worms. The company is hiring you as a contractor to avoid direct employee expenses. However, this is not legal if the majority of your compensation comes from this single entity. However this irs rule is widely violated.

It gets worse, if the majority of your income comes from 1099 then you may have to pay estimated taxes quarterly.

See a tax accountant.

I could see if I owned a business, but I don't and this is kind of unusual that a place would do this. It all my years in IT I never was put in this situation.

 

[jderimig]

If you get paid via a 1099 you are contractor and thus you own your business. You are NOT an employee unless you get a W2.

 

[Jmhepworth]

Getting a 1099 is significantly worse financially then a w-2 for the same hourly wage. Although income tax is the same, if you get a 1099, you get to pay self employment tax, which is all of the social security tax, including the half that the employer otherwise pays. It adds up to about 15% instead of half that. You also need to make quarterly payments, as noted above, or you get penalized. So while getting paid as an independent contractor through a 1099 is better than not working, there are significant costs that make being an employee for the same wage a much better deal. If you aren't pretty savvy with taxes, get help from an accountant. At a minimum, get some tax preparation software for a small business. That's what you are. It also makes sense to open a separate bank account and run all of your business expenses through it. Lots of people get paid this way, so it's doable. But it's a much different matter than just being an employee.

Joe

 

[KenRico]

I did some 1099 work a few years ago, but was uber cautious with taxes. Also the amounts fluctuated so was hard to estimate for the year - was not selling products only my time.

Ended up doing this, depositing 1099 money into one account for business only, each month would write a check to me for 70% and deposit it normal household account. Would make a payment for each of the first three quarters to the fed & state tax boards ..then at the end of the year when I knew my totals - would run early quickee tax return, if it didn't look like I owed more than what I had already sent in - would treat the 4th quarter money as early tax return .

No high dollar accounting, didn't buy fax machine and computers, no measuring and depreciating - think i wrote off mileage, postage, and dedicated phone line only. Also did not have to do TIN or FBN as I was : My Name, Consultant .

Kenny

 

[jderimig]

Getting a 1099 is significantly worse financially then a w-2 for the same hourly wage. Although income tax is the same, if you get a 1099, you get to pay self employment tax, which is all of the social security tax, including the half that the employer otherwise pays. It adds up to about 15% instead of half that. You also need to make quarterly payments, as noted above, or you get penalized. So while getting paid as an independent contractor through a 1099 is better than not working, there are significant costs that make being an employee for the same wage a much better deal. If you aren't pretty savvy with taxes, get help from an accountant. At a minimum, get some tax preparation software for a small business. That's what you are. It also makes sense to open a separate bank account and run all of your business expenses through it. Lots of people get paid this way, so it's doable. But it's a much different matter than just being an employee.

Joe

+1

Also you are not eligible for unemployment insurance at the end of the gig because your company has not paid into for you (because you are not an employee). Generally though, as a contractor you should be getting significantly higher gross compensation with this arrangement.

I think you will be seeing alot more of this crap as federal and state governments mandate more "benefits". No one will want employees and will find ways to avoid them altogether. Welcome to the new normal.

 

[belfert]

Contract work generally pays more in cash wages than W-2 work, often much more. You'll get no benefits such as health insurance, vacation, holidays, or sick time. Any time off is unpaid.

Businesses like contract workers because it is generally easier to terminate them if they don't work out. They can also hire experts in certain areas for projects without having to lay off employees when the project ends,

 

[AfterBurners]

+1

Also you are not eligible for unemployment insurance at the end of the gig because your company has not paid into for you (because you are not an employee). Generally though, as a contractor you should be getting significantly higher gross compensation with this arrangement.

I think you will be seeing alot more of this crap as federal and state governments mandate more "benefits". No one will want employees and will find ways to avoid them altogether. Welcome to the new normal.

You know what you guys are right. I don't like this arrangement and not be eligible for unemployment is what really sold me on not doing this gig. It seemed like the staffing agency seemed unsure about how I was to be paid, but I will wait and find out for sure if it is in fact a 1099.

 

[r1dermon]

https://www.forbes.com/sites/robertwood/2013/01/25/1099-or-w-2-giving-or-receiving-be-careful/

 

[AfterBurners]

https://www.forbes.com/sites/robertwood/2013/01/25/1099-or-w-2-giving-or-receiving-be-careful/

Good read...Thanks!

"If you’re the worker, you may be tempted to say “1099,” figuring you’ll get a bigger check that way. Of course, you’ll actually owe higher taxes. As an independent contractor, you’ll owe not only income tax, but self-employment tax too. In contrast, if you’re an employee, you pay only one half the Social Security tax, plus one half the Medicare rate. Your employer pays the other half."

 

[Marc_G]

Also, keep in mind you generally won't be eligible for workman's comp if you are injured on the job.

It's good that you are doing your homework before accepting the offer.

All these caveats aside, it might be a good gig, as long as you go into it understanding the situation.

Marc

 

[AfterBurners]

Also, keep in mind you generally won't be eligible for workman's comp if you are injured on the job.

It's good that you are doing your homework before accepting the offer.

All these caveats aside, it might be a good gig, as long as you go into it understanding the situation.

Marc

I could always tell them if they want to pay me as a 1099 then that would make me contractor and seeing that I'm a contractor and supposedly in their eyes self employed then they can pay me twice the pay rate they offered me. I should be able to determine what I want to get paid not them!!

 

[cerving]

Getting a 1099 is significantly worse financially then a w-2 for the same hourly wage. Although income tax is the same, if you get a 1099, you get to pay self employment tax, which is all of the social security tax, including the half that the employer otherwise pays. It adds up to about 15% instead of half that. You also need to make quarterly payments, as noted above, or you get penalized. So while getting paid as an independent contractor through a 1099 is better than not working, there are significant costs that make being an employee for the same wage a much better deal. If you aren't pretty savvy with taxes, get help from an accountant. At a minimum, get some tax preparation software for a small business. That's what you are. It also makes sense to open a separate bank account and run all of your business expenses through it. Lots of people get paid this way, so it's doable. But it's a much different matter than just being an employee.

Joe

^^^^ SOOOO TRUE! ^^^^

My 20 y/o son worked for a telemarking firm last Summer (please, no comments on THAT...), and they made everybody that worked there an independent contractor. He made about $3,000 working there last year, and, guess what? He had to PAY almost $800 in taxes since they didn't deduct anything for SSI, CA SDI, etc. That's what the 1040 SE is for. This is a real cheesy way for companies to get out of having to do the paperwork themselves... lazy b******s.

Since is sounds like this is otherwise a good opportunity, I would find a good tax accountant and find out what the exact tax implication is going to be, and put away money some from each paycheck to cover it. Direct deposit into a new account would be good.

 

[AfterBurners]

I would go that far as a good opportunity. I'm not getting paid anymore than I was making at my last job, yet now I have to pay all the taxes and on top of that not being eligible for unemployment.

 

[cerving]

Ya, sounds like a rethink is in order...

BTW, you didn't say but I assume this is some kind of IT migration. I've been in the biz for 35 years, and I have yet to see any migration, especially an ERP migration, that finished either on-time or on-budget. You may be there longer than you think. If it's a Windows XP to Win 7/8 desktop migration, good luck... you're going to run into a lot of obstacles, especially if the PC environment isn't very homogeneous.

 

[AfterBurners]

I talked again to the guy who works for the staffing agency that is placing individuals and I asked if he knew for sure if it was in fact a 1099. He said yes because everyone on the job / project is 1099. I told him to find someone else and stated my reasons why I wasn't interested. I'm glad I didn't take the job. The only time I could see being on a 1099 if in fact I owned my own company and if I did I would charge a heck of a lot more than what they wanted to pay me and I would decide when and what days I wanted to work. It's bad enough companies out there don't want to hire employees and do whatever they can to get away from paying them benefits yet alone this company trying to stripe away everything.

It's a complete joke.

Thanks guys for your insight. You made this decision a lot easier.

 

[belfert]

You're right not to take a 1099 job if it doesn't pay a lot more than a W2 job. A lot of IT jobs today are contract jobs that might last 9 to 12 months. The only way I would take a 1099 job is if I lost my job and it was the only thing I could find. In my part of the IT world 1099 jobs pay upwards of double what I make now, but you're not making twice the money when you consider benefits and self employment taxes.

In most cases you don't have the freedom as a 1099 worker to just work when you want. You'll typically be expected to work a fixed schedule like any regular employee. The reality is that most 1099 contract employees really should be normal employees since they are generally treated the same as regular employees by the company, just without any benefits.

 

[AfterBurners]

You're right not to take a 1099 job if it doesn't pay a lot more than a W2 job. A lot of IT jobs today are contract jobs that might last 9 to 12 months. The only way I would take a 1099 job is if I lost my job and it was the only thing I could find. In my part of the IT world 1099 jobs pay upwards of double what I make now, but you're not making twice the money when you consider benefits and self employment taxes.

In most cases you don't have the freedom as a 1099 worker to just work when you want. You'll typically be expected to work a fixed schedule like any regular employee. The reality is that most 1099 contract employees really should be normal employees since they are generally treated the same as regular employees by the company, just without any benefits.

That's so true......