"Greg Alaksdjflk" <GregoryOnline[at]bigfoot.com> wrote:

- quote -

Assuming that you can justify calling yourself an
independent contractor to the irs, lets look at the numbers.
Engineers like me are sometimes faced with this choice. As
a rule of thumb, we want double our w2 hourly rate as a
contractor. Take the yearly w2 rate, $100,000. Divide by
2080 hours/year. Notice that you are being paid at this
hourly rate for vacation, holidays, sick leave, training
time, and maybe other unproductive time. Double that rate
and apply it to the actual number of productive hours in
your year. You need that much to cover all of the new
expenses you will have and still come out ahead. If you do
not come out substantially ahead, it is not worth being a
contractor. You will be paying for all of your fringe
benefits, business and possibly professional insurance,
legal and accounting services, lots of that because you
should be a corporation or at least an LLC. Yes, most of
that is with pretax money. It is all a big headache. Some
people are well suited for this. They are the ones who want
lots of paid overtime and cannot bear to stop for a vacation.

I do not know what to make of the $166,000/yr rate. Is this
for the regular employee hours. That is you get vacation,
sick leave, etc at that yearly rate? Do they expect unpaid
overtime? All of this makes you an employee. You must
demand a satisfactory hourly rate for all hours worked.
Anything else will have the IRS laughing and rejecting your
status at your expense. Even if this is right, can you show
them that you have the other trappings of self employment?
Do you have multiple clients, work at times and places of
your choice, hire people to do some of the work? Sometimes
charge by the project rather than by the hour?

I think the $100,000 looks good.

Jack Brody

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Greg Alaksdjflk wrote:

- quote -

You think there's a choice?

Legally, there is no such choice.

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GregoryOnline[at]bigfoot.com (Greg Alaksdjflk) writes:

- quote -

The $166,000 contract will leave you with more after-tax
income than the $100,000 salary. You will need to get a
Form 1040-ES and calculate and make estimated tax payments.
Aside from taxes, I assume you've already done the
calculations for such things as health insurance, vacation,
and sick pay.

BTW whether a worker is an employee or an independent
contractor is not dealer's choice. It's perfectly fine,
though, to structure the relationship as one or the other.
See Form SS-8.

Phil Marti
Topeka, KS

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GregoryOnline[at]bigfoot.com (Greg Alaksdjflk) wrote:

- quote -

If you are going to be doing the same work at the same
place, under the same conditions, the second options almost
certainly constitutes and invitation to tax fraud. An
independent contractor is not something you can simply elect
to become. There are a bunch of disqualifying conditions.

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- quote -

It is not the employer's choice to make, it is a matter of
facts. See pub 15-A for the 18 or so questions to see if
you are in fact an employee or independent.

Helen, EA in PA
Member of The Tax Gang
President, PA Society of Enrolled Agents
1040EZ and 1040A tax prep at www.1040.com/1040pro

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"Greg Alaksdjflk" <GregoryOnline[at]bigfoot.com> wrote:

- quote -

The question of employee/contractor is a matter of facts,
not a matter of what creates more take home pay.

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.

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"Greg Alaksdjflk" <GregoryOnline[at]bigfoot.com> wrote:

- quote -

Unless you file an SS-8 and it is approved by the IRS,
you should not consider this further.

Dick

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I was offered an option by the company I work with
to work full time at $100,000.00/year+benefits or by
independent contract (1099) $166,000.00/year no
benefits.

I want to maximize my total take-home paycheck.

Which is the best choice given that I live in arizona
and am single/no dependants.

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