Job Expenses for contract job. Should I take W2 or 1099

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AKBTX14
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Job Expenses for contract job. Should I take W2 or 1099

Post by AKBTX14 » Tue Mar 20, 2018 6:59 pm

Hi

I am being offered a project consultant role for approx. 11 months. The company can do either 1099 or W2. This is a straight hourly role without any other benefits.

I worked many years ago as a regular W2 employee with all benefits, but not 1099 on or W2 contract term job. All my job expenses in the past were usually charged to company CC.

I will have car, hotel and flight expenses that will be my own. I might also buy a new laptop and technology related items for my project.

The project will be out of state in the beginning and I may move back to home office at project closing stage.

We file taxes joint. In 2016, AGI was $204K and Taxable was $164K. There is not state income tax for me.

Should I take W2 or 1099?

Thanks and Regards

PFInterest
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by PFInterest » Tue Mar 20, 2018 7:06 pm

Which gives you more after tax? Usually IC pay needs to be like 15-20% higher to make it worthwhile.

AKBTX14
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by AKBTX14 » Tue Mar 20, 2018 7:13 pm

PFInterest wrote:
Tue Mar 20, 2018 7:06 pm
Which gives you more after tax? Usually IC pay needs to be like 15-20% higher to make it worthwhile.
Little more explanation please :?

N10sive
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by N10sive » Tue Mar 20, 2018 7:15 pm

AKBTX14 wrote:
Tue Mar 20, 2018 7:13 pm
PFInterest wrote:
Tue Mar 20, 2018 7:06 pm
Which gives you more after tax? Usually IC pay needs to be like 15-20% higher to make it worthwhile.
Little more explanation please :?
Sometimes pay is different based on W2 vs 1099. Usually in a 1099 position the employee has to pay the full social security tax whereas a W2 employee only has to pay half. A 1099 employee also is usually taxed more that is why the suggestion pay needs to be 15-20% higher.

If the pay is the same, then a W2 would be more desirable in my opinion

AKBTX14
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by AKBTX14 » Tue Mar 20, 2018 7:34 pm

N10sive wrote:
Tue Mar 20, 2018 7:15 pm
AKBTX14 wrote:
Tue Mar 20, 2018 7:13 pm
PFInterest wrote:
Tue Mar 20, 2018 7:06 pm
Which gives you more after tax? Usually IC pay needs to be like 15-20% higher to make it worthwhile.
Little more explanation please :?
Sometimes pay is different based on W2 vs 1099. Usually in a 1099 position the employee has to pay the full social security tax whereas a W2 employee only has to pay half. A 1099 employee also is usually taxed more that is why the suggestion pay needs to be 15-20% higher.

If the pay is the same, then a W2 would be more desirable in my opinion
Pay is the same. They offered W2 and 1099 If I want that option.

So I am assuming that on W2 I can still claim job related expenses (for tax purposes) not paid by employer when I am traveling and staying away from home for extended periods?

Thanks

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tractorguy
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by tractorguy » Tue Mar 20, 2018 8:14 pm

If pay is the same W 2 is almost always a better deal. The employer pays half of social security and Medicare. This is 7.65 % on the first $128,000 and 1.45% on income above that. This is in addition to the social security and Medicare tax you pay as an employee. You also usually get access to other benefits like paid vacations, paid sick leave, or medical benefits. As a 1099 employee you only get paid if you are working.

On the flip side you can deduct more of your non compensated work expenses as a 1099 employee because there is a minimum threshold of 2% of AGI before you can deduct any work related expenses as an employee.
Lorne

JBTX
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by JBTX » Tue Mar 20, 2018 8:23 pm

AKBTX14 wrote:
Tue Mar 20, 2018 7:34 pm
N10sive wrote:
Tue Mar 20, 2018 7:15 pm
AKBTX14 wrote:
Tue Mar 20, 2018 7:13 pm
PFInterest wrote:
Tue Mar 20, 2018 7:06 pm
Which gives you more after tax? Usually IC pay needs to be like 15-20% higher to make it worthwhile.
Little more explanation please :?
Sometimes pay is different based on W2 vs 1099. Usually in a 1099 position the employee has to pay the full social security tax whereas a W2 employee only has to pay half. A 1099 employee also is usually taxed more that is why the suggestion pay needs to be 15-20% higher.

If the pay is the same, then a W2 would be more desirable in my opinion
Pay is the same. They offered W2 and 1099 If I want that option.

So I am assuming that on W2 I can still claim job related expenses (for tax purposes) not paid by employer when I am traveling and staying away from home for extended periods?

Thanks
There’s a lot to unpack here.

First an employer really shouldn’t be giving this choice. Either the nature of the work is as employee or independent contractor. They aren’t the same thing. Having said that it isn’t uncommon for companies to to this. The risks are more with them than with you.

As an employee you don’t have liability exposure. As a 1099 independent contractor you do. You should either have professional liability insurance, or have business form set up that limits liability, or else make the determination that the liability risk is minimal and is not a factor.

As for expenses, as an employee, are you on the hook for expenses or will they reimburse you? If they don’t reimburse you, then your opportunities to write them off as employee expenses are much more limited vs as a business through 1099 and schedule C, especially with new tax law.

https://www.google.com/amp/s/www.cnbc.c ... ayers.html

Also, if you are employee, are you full time salaried or part time hourly? How is OT handled in both situation. If you are employee, do you get any PTO or paid holidays? Typically you ha e zero benefits as 1099. I’ve worked as 1099 off and on and it’s not uncommon to work less than 40 hours in a week. With a full time employee there are laws such that it makes it difficult to pay a salaried employee less than 40
Hours in a week. So can you say for sure that you will get paid for just as many hours as 1099 as you would as employee?

As an employee you may be entitled to unemployment insurance when you are termintated, depending on the situation and circumstances. Probably not as 1099.

As an employee, you are not responsible for employer side of FICA - approximately 7.65% or your gross income, up to a cap of around $130k (Medicare portion has no cap) You only have to pay (via withholding the employee side) As 1099, you will have to pay self employment tax, which is both employer and employee side. So you will have to pay approx 7.65% more as 1099. Once you are over approx $130k it’s no longer much of an issue except for employer Medicare, which is approx 1.4%.

Starting in 2018, pass through entities, such as sole proprietor ships get a 20% deduction of their net income. This would be a benefit of 1099 and you wouldn’t get this as an employee. However there are limits to the deductions for high incomes for certain professionals.

It is probably fair to say that the 20% deduction roughly offsets the extra 7.65% self employment tax so those are roughly a push.

So it really depends on a lot of things many of which are not revealed here.

Spirit Rider
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by Spirit Rider » Tue Mar 20, 2018 8:38 pm

tractorguy wrote:
Tue Mar 20, 2018 8:14 pm
On the flip side you can deduct more of your non compensated work expenses as a 1099 employee because there is a minimum threshold of 2% of AGI before you can deduct any work related expenses as an employee.
The recent tax reform eliminated all Schedule A deductions subject to the 2% floor. Including unreimbursed employee business expenses.

I wouldn't work for this company at all. I have worked for several companies that had project based positions. Every single one reimbursed for air travel, car rental, meals and lodging. I wouldn't take such a position in such a cheap company even if the deduction for unreimbursed employee business expenses still existed.

A company that expects you to be an IC without a substantial premium over a W-2 hourly rate is beyond predatory.

Other than that I don't have an opinion :annoyed

JBTX
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by JBTX » Tue Mar 20, 2018 8:49 pm

Spirit Rider wrote:
Tue Mar 20, 2018 8:38 pm
tractorguy wrote:
Tue Mar 20, 2018 8:14 pm
On the flip side you can deduct more of your non compensated work expenses as a 1099 employee because there is a minimum threshold of 2% of AGI before you can deduct any work related expenses as an employee.
The recent tax reform eliminated all Schedule A deductions subject to the 2% floor. Including unreimbursed employee business expenses.

I wouldn't work for this company at all. I have worked for several companies that had project based positions. Every single one reimbursed for air travel, car rental, meals and lodging. I wouldn't take such a position in such a cheap company even if the deduction for unreimbursed employee business expenses still existed.

A company that expects you to be an IC without a substantial premium over a W-2 hourly rate is beyond predatory.

Other than that I don't have an opinion :annoyed
I agree with this. Anybody that would not directly reimburse an employee for expenses via an expense reimbursement is a crappy company.

AKBTX14
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by AKBTX14 » Wed Mar 21, 2018 9:57 am

Thanks all.

I am doing this for first time, but now I know what to take back for negotiation.

Regards

JBTX
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by JBTX » Wed Mar 21, 2018 10:37 am

To give you some benchmarks, a staffing company of temp professional labor will have a markup near 100%. If your hourly w2 rate is $50, they bill around $100. All expenses would be reimbursed separately.

For professional engineering companies, their multipliers tend to be around 2.0, plus or minus, assuming client provides office space and pays all office related expenses. Ratios are higher for employees that work out of engineering company office.

If you are just talking an increasing for 1099 to cover benefits, taxes and insurance, I’d say you would have a 35% or greater premium.

In no case should you be shouldering business expenses such as travel, etc.

Spirit Rider
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by Spirit Rider » Wed Mar 21, 2018 11:35 am

JBTX wrote:
Wed Mar 21, 2018 10:37 am
In no case should you be shouldering business expenses such as travel, etc...
While that is true statement. It is not necessary that you be directly reimbursed for travel expenses, but you should be compensated for them.

I contracted for a company that received IRS Form SS-8 approval with specific conditions. One of those conditions was that no contractor business expenses be reimbursed.

To compensate, I was paid a premiun above my hourly rate for travel time and work hours while traveling that more than made up for travel expenses.

I worked for another company where I received an hourly premium for all hours worked to cover average expenses for 25% travel. I think I came ahead there too.

In no case would I ever accept a contract where I was not compensated for travel expenses one way or another.

michaeljc70
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by michaeljc70 » Wed Mar 21, 2018 2:55 pm

JBTX wrote:
Tue Mar 20, 2018 8:23 pm
AKBTX14 wrote:
Tue Mar 20, 2018 7:34 pm
N10sive wrote:
Tue Mar 20, 2018 7:15 pm
AKBTX14 wrote:
Tue Mar 20, 2018 7:13 pm
PFInterest wrote:
Tue Mar 20, 2018 7:06 pm
Which gives you more after tax? Usually IC pay needs to be like 15-20% higher to make it worthwhile.
Little more explanation please :?
Sometimes pay is different based on W2 vs 1099. Usually in a 1099 position the employee has to pay the full social security tax whereas a W2 employee only has to pay half. A 1099 employee also is usually taxed more that is why the suggestion pay needs to be 15-20% higher.

If the pay is the same, then a W2 would be more desirable in my opinion
Pay is the same. They offered W2 and 1099 If I want that option.

So I am assuming that on W2 I can still claim job related expenses (for tax purposes) not paid by employer when I am traveling and staying away from home for extended periods?

Thanks
There’s a lot to unpack here.

First an employer really shouldn’t be giving this choice. Either the nature of the work is as employee or independent contractor. They aren’t the same thing. Having said that it isn’t uncommon for companies to to this. The risks are more with them than with you.

As an employee you don’t have liability exposure. As a 1099 independent contractor you do. You should either have professional liability insurance, or have business form set up that limits liability, or else make the determination that the liability risk is minimal and is not a factor.

As for expenses, as an employee, are you on the hook for expenses or will they reimburse you? If they don’t reimburse you, then your opportunities to write them off as employee expenses are much more limited vs as a business through 1099 and schedule C, especially with new tax law.

https://www.google.com/amp/s/www.cnbc.c ... ayers.html

Also, if you are employee, are you full time salaried or part time hourly? How is OT handled in both situation. If you are employee, do you get any PTO or paid holidays? Typically you ha e zero benefits as 1099. I’ve worked as 1099 off and on and it’s not uncommon to work less than 40 hours in a week. With a full time employee there are laws such that it makes it difficult to pay a salaried employee less than 40
Hours in a week. So can you say for sure that you will get paid for just as many hours as 1099 as you would as employee?

As an employee you may be entitled to unemployment insurance when you are termintated, depending on the situation and circumstances. Probably not as 1099.

As an employee, you are not responsible for employer side of FICA - approximately 7.65% or your gross income, up to a cap of around $130k (Medicare portion has no cap) You only have to pay (via withholding the employee side) As 1099, you will have to pay self employment tax, which is both employer and employee side. So you will have to pay approx 7.65% more as 1099. Once you are over approx $130k it’s no longer much of an issue except for employer Medicare, which is approx 1.4%.

Starting in 2018, pass through entities, such as sole proprietor ships get a 20% deduction of their net income. This would be a benefit of 1099 and you wouldn’t get this as an employee. However there are limits to the deductions for high incomes for certain professionals.

It is probably fair to say that the 20% deduction roughly offsets the extra 7.65% self employment tax so those are roughly a push.

So it really depends on a lot of things many of which are not revealed here.
Good job covering the bases.

I've done contracting for 20+ years. Usually you don't get the choice at the same rate.

The big negative for me on a W2 was being able to put only $5500 in an IRA instead of potentially approx $40k in a Sep tax deferred when on a 1099.

JBTX
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by JBTX » Wed Mar 21, 2018 3:47 pm

michaeljc70 wrote:
Wed Mar 21, 2018 2:55 pm
JBTX wrote:
Tue Mar 20, 2018 8:23 pm
AKBTX14 wrote:
Tue Mar 20, 2018 7:34 pm
N10sive wrote:
Tue Mar 20, 2018 7:15 pm
AKBTX14 wrote:
Tue Mar 20, 2018 7:13 pm


Little more explanation please :?
Sometimes pay is different based on W2 vs 1099. Usually in a 1099 position the employee has to pay the full social security tax whereas a W2 employee only has to pay half. A 1099 employee also is usually taxed more that is why the suggestion pay needs to be 15-20% higher.

If the pay is the same, then a W2 would be more desirable in my opinion
Pay is the same. They offered W2 and 1099 If I want that option.

So I am assuming that on W2 I can still claim job related expenses (for tax purposes) not paid by employer when I am traveling and staying away from home for extended periods?

Thanks
There’s a lot to unpack here.

First an employer really shouldn’t be giving this choice. Either the nature of the work is as employee or independent contractor. They aren’t the same thing. Having said that it isn’t uncommon for companies to to this. The risks are more with them than with you.

As an employee you don’t have liability exposure. As a 1099 independent contractor you do. You should either have professional liability insurance, or have business form set up that limits liability, or else make the determination that the liability risk is minimal and is not a factor.

As for expenses, as an employee, are you on the hook for expenses or will they reimburse you? If they don’t reimburse you, then your opportunities to write them off as employee expenses are much more limited vs as a business through 1099 and schedule C, especially with new tax law.

https://www.google.com/amp/s/www.cnbc.c ... ayers.html

Also, if you are employee, are you full time salaried or part time hourly? How is OT handled in both situation. If you are employee, do you get any PTO or paid holidays? Typically you ha e zero benefits as 1099. I’ve worked as 1099 off and on and it’s not uncommon to work less than 40 hours in a week. With a full time employee there are laws such that it makes it difficult to pay a salaried employee less than 40
Hours in a week. So can you say for sure that you will get paid for just as many hours as 1099 as you would as employee?

As an employee you may be entitled to unemployment insurance when you are termintated, depending on the situation and circumstances. Probably not as 1099.

As an employee, you are not responsible for employer side of FICA - approximately 7.65% or your gross income, up to a cap of around $130k (Medicare portion has no cap) You only have to pay (via withholding the employee side) As 1099, you will have to pay self employment tax, which is both employer and employee side. So you will have to pay approx 7.65% more as 1099. Once you are over approx $130k it’s no longer much of an issue except for employer Medicare, which is approx 1.4%.

Starting in 2018, pass through entities, such as sole proprietor ships get a 20% deduction of their net income. This would be a benefit of 1099 and you wouldn’t get this as an employee. However there are limits to the deductions for high incomes for certain professionals.

It is probably fair to say that the 20% deduction roughly offsets the extra 7.65% self employment tax so those are roughly a push.

So it really depends on a lot of things many of which are not revealed here.
Good job covering the bases.

I've done contracting for 20+ years. Usually you don't get the choice at the same rate.

The big negative for me on a W2 was being able to put only $5500 in an IRA instead of potentially approx $40k in a Sep tax deferred when on a 1099.
You are correct one advantage of 1099 us ability to put more in tax deferred solo 401k or other vehicle.

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Nestegg_User
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by Nestegg_User » Wed Mar 21, 2018 4:52 pm

No way I’d take the 1099

Does the company also expect a certain “level” of vehicle? Some require cars no older than X years, 4door sedans at certain trim level. That’s also an expense, and let’s say you were a contractor out of Dallas but needed to head to Killeen (~275 miles rd trip), to Abilene (~360 miles rd trip), or San Antonio (~550 miles rd trip) - it would be a lot of miles on the car and unreimbursed business expenses of about $150, $200, and $300 respectively at the 2018 business rates of 54.5 cents/mile, for each trip. And we haven’t even discussed the cost of lodging... Those used to be able to be deductible, but no longer. In addition, as a 1099 employee you would not be covered by the company insurance while in transit, and may need a separate insurance rider for coverage, since you would then be using the vehicle for business purposes, not just commuting.

I would be very leary of a company that wouldn’t reimburse hotels, vehicles, or other direct business costs but instead sluffs them off to their employees. Normally a contractor would, if they needed to expense them, increase the rack rate by at least 25-30% and likely more if it’s an ongoing expense that would result in significant vehicle depreciation via mileage/use (I can’t remember if it’s 5 or 7 years...someone here on BH would remember) in addition to a “zone charge” to cover the time costs to get there.

{That’s in addition to the other issues brought up above like liability, unemployment, etc}

None of that seems to be recognized in their offer.

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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by michaeljc70 » Wed Mar 21, 2018 6:11 pm

Nestegg_User wrote:
Wed Mar 21, 2018 4:52 pm
No way I’d take the 1099

Does the company also expect a certain “level” of vehicle? Some require cars no older than X years, 4door sedans at certain trim level. That’s also an expense, and let’s say you were a contractor out of Dallas but needed to head to Killeen (~275 miles rd trip), to Abilene (~360 miles rd trip), or San Antonio (~550 miles rd trip) - it would be a lot of miles on the car and unreimbursed business expenses of about $150, $200, and $300 respectively at the 2018 business rates of 54.5 cents/mile, for each trip. And we haven’t even discussed the cost of lodging... Those used to be able to be deductible, but no longer. In addition, as a 1099 employee you would not be covered by the company insurance while in transit, and may need a separate insurance rider for coverage, since you would then be using the vehicle for business purposes, not just commuting.

I would be very leary of a company that wouldn’t reimburse hotels, vehicles, or other direct business costs but instead sluffs them off to their employees. Normally a contractor would, if they needed to expense them, increase the rack rate by at least 25-30% and likely more if it’s an ongoing expense that would result in significant vehicle depreciation via mileage/use (I can’t remember if it’s 5 or 7 years...someone here on BH would remember) in addition to a “zone charge” to cover the time costs to get there.

{That’s in addition to the other issues brought up above like liability, unemployment, etc}

None of that seems to be recognized in their offer.
As I understand it, the OP chose to work away from his home. Why should the employer be on the hook for that? It is like if you apply for a job 120 miles away and expect the employer to pay for your commute.

danaht
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by danaht » Wed Mar 21, 2018 6:24 pm

Three big advantages for 1099:
1) 1099 gives you the ability to put more money in a solo 401k or SEP
2) 1099 gives you the ability to deduct your healthcare premiums (if you do not qualify for a subsidy)
3) Self employed can "expense" some business expenses which will reduce your taxes.

1099 disadvantages:
1) You will pay double the payroll taxes
2) You take on more liability

Because you pay double the payroll tax, and due to the increased liability - you should ask for a lot more when taking a 1099 position.
Having said that - I much prefer being 1099 or corp to corp because of the solo 401k benefit. Also a W2 position without any benefits (401k, vacation, sick time) is really bad.

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Nestegg_User
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by Nestegg_User » Wed Mar 21, 2018 6:34 pm

michael

I was interpreting it to be a contractor with travel-

local commuting expenses wouldn’t be expected to be covered for such contractors

depending on how he would use his vehicle, he MAY still need to get a separate rider

The cost for his housing in the “home” area is on his dime, but other hotels shouldn’t be, if it’s their business expense.

and as danaht said above, that job with NO other benefits is not very enticing

[the people I knew in 1099 positions were usually support engineers and required lots of travel, but they almost always had a company fleet vehicle with insurance]

golfCaddy
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by golfCaddy » Wed Mar 21, 2018 6:55 pm

Legally, the company can't give you this choice. The IRS has a definition of an employee, which you either meet or don't. If this is going to be the only company that you're contracting for and they're going to be exercising the same level of oversight over you that they do for their employees, then it's likely you are an employee and it would be illegal for the company to treat you as a 1099.

michaeljc70
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by michaeljc70 » Wed Mar 21, 2018 6:58 pm

golfCaddy wrote:
Wed Mar 21, 2018 6:55 pm
Legally, the company can't give you this choice. The IRS has a definition of an employee, which you either meet or don't. If this is going to be the only company that you're contracting for and they're going to be exercising the same level of oversight over you that they do for their employees, then it's likely you are an employee and it would be illegal for the company to treat you as a 1099.
Having done this kind of work for 20+ years, things have changed. Most places now will only do a 1099 if you are incorporated which insulates (if not removes) their liability. That being said, if you look at the IRS list of criteria, it is not always black and white. Companies just usually don't want the liability.

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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by NoNonsenseLandlord » Wed Mar 21, 2018 8:14 pm

It's almost always better to go 1099, even more so in 2018.

You can take a bunch of business write-offs as a 1099. Then you should incorporate. You can take ~50% of your after business expense as a W2 wage, and the other as a dividend. No self-employment taxes with a dividend. It saves 15.3% of taxes. Maybe an LLC you can do the same?

In 2018, the self-employment taxes will get a 20% deduction. That's huuuge.

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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by Spirit Rider » Wed Mar 21, 2018 8:35 pm

michaeljc70 wrote:
Wed Mar 21, 2018 6:58 pm
golfCaddy wrote:
Wed Mar 21, 2018 6:55 pm
Legally, the company can't give you this choice. The IRS has a definition of an employee, which you either meet or don't. If this is going to be the only company that you're contracting for and they're going to be exercising the same level of oversight over you that they do for their employees, then it's likely you are an employee and it would be illegal for the company to treat you as a 1099.
Having done this kind of work for 20+ years, things have changed. Most places now will only do a 1099 if you are incorporated which insulates (if not removes) their liability. That being said, if you look at the IRS list of criteria, it is not always black and white. Companies just usually don't want the liability.
The bolded text is an overgenralization of the IRS IC vs Employee criteria.

The fact that a company routinely classifies specific positions as employment has no bearing on whether that role could be classified as an IC. The IRS never has a concern if a role that meets all the requirements of an IC is classified as employment. Only the other way around

This means there are a significant number of positions where there can be choice between employment and IC classification. This can be done with certain behavioral, financial and relationship contractual terms. You can't turn any employment into IC status, but there are many positions that are already pretty much already there. It is far more likely with senior autonomous professional positions.

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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by Spirit Rider » Wed Mar 21, 2018 8:44 pm

NoNonsenseLandlord wrote:
Wed Mar 21, 2018 8:14 pm
It's almost always better to go 1099, even more so in 2018.

You can take a bunch of business write-offs as a 1099. Then you should incorporate. You can take ~50% of your after business expense as a W2 wage, and the other as a dividend. No self-employment taxes with a dividend. It saves 15.3% of taxes. Maybe an LLC you can do the same?

In 2018, the self-employment taxes will get a 20% deduction. That's huuuge.
Pretty much everything you stated is misinformation.

You can deduct the same business expenses whether you are self-employed or an S-Corp. An LLC is a state chartered business entity having nothing to do with taxation. An LLC can also choose to be treated as self-employment or an S-Corp. S-Corps have shareholder-employee W-2 Wages and ordinary income distributions not dividends.

The new 199A 20% deduction is on Qualified Business Income (QBI) and has absolutely nothing to do with SE taxes. Although, the S-Corp will have substantially less QBI, which will diminish the value of the FICA tax savings on the distribution.

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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by ralph124cf » Thu Mar 22, 2018 9:58 am

Note that the IRS is still writing the tax rules to comply with the new tax law. What the 2018 tax law actually means with respect to business expenses may not be settled until 2019 or 2020, after a few court cases.

Good luck on guessing right.

Ralph

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Hayden
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Re: Job Expenses for contract job. Should I take W2 or 1099

Post by Hayden » Thu Mar 22, 2018 10:22 am

JBTX wrote:
Wed Mar 21, 2018 10:37 am
To give you some benchmarks, a staffing company of temp professional labor will have a markup near 100%. If your hourly w2 rate is $50, they bill around $100. All expenses would be reimbursed separately.

For professional engineering companies, their multipliers tend to be around 2.0, plus or minus, assuming client provides office space and pays all office related expenses. Ratios are higher for employees that work out of engineering company office.

If you are just talking an increasing for 1099 to cover benefits, taxes and insurance, I’d say you would have a 35% or greater premium.

In no case should you be shouldering business expenses such as travel, etc.
I wonder what industry you are in. In my industry, pricing has become brutal in recent years and multipliers are much lower than the numbers you cite.

OP, don't forget how much you can put away tax free in a solo 401k, if you are 1099. Assuming you negotiate the 1099 rate appropriately, I think you are likely to be better off with 1099.

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