Consultant leaning toward 1099 instead of W2 and looking for advice

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coopermonster
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Consultant leaning toward 1099 instead of W2 and looking for advice

Post by coopermonster » Sun Apr 15, 2018 4:38 pm

I recently quit my day job to be a full-time self-employed consultant (a dream many years in the making!) and on May 1st my current employer will become my newest consulting client.

They’re letting me decide between being a part-time W2 employee or a 1099 contractor. I’ve read a number of related posts on this subject and W2 is often the winner, but my particular circumstances have me thinking 1099 will be the best option so I'm curious for feedback and advice.

With either option, I'll be working roughly 20 hours/week or 80 hours/month.

Reasons to do W2:
  • I’d be a part-time employee and eligible for medical/dental/vision benefits. However, their employer contribution is only $350/month and I could get a comparable plan through Covered California for only $400 more per month than I'm currently paying.
  • I'd have access to a 401k, but there's no employer match and it has poor investment options. I could contribute more to a Solo 401k if I were 1099 and would have better options.
  • I'd have access to a HDHP with an HSA, but there's no employer match and I could stay on the current plan for 18 months with COBRA or switch to an HDHP with HSA through Covered California
  • I'd be eligible for a 10% quarterly bonus (10% of that quarter’s salary aka 2.5% of annual salary) if we meet performance objectives (I could try to negotiate this as a 1099 contractor, too)
Reasons to do 1099:
  • They’ll pay me a ~25% higher rate to compensate for the lack of benefits, increased liability, having to pay more payroll taxes, etc.
  • I’d be able to increase my tax deductions, since I could factor in my home office/utilities/etc (don't think I can do this if I I'm W2, since my office would be used partially for "regular employment" and partially for my consulting business)
  • Could contribute more to retirement savings if I’d like via a Solo 401k
  • It’d be easier to decrease or increase my hours (and thus compensation) if I want to. Regardless of whether I go 1099 or W2, they’d like me to aim for 80 hours/month (20 hours/week), but they’re happy with me working more or less if needed (even 40 hours/week) if I want to. This could be excellent as a 1099 contractor:
    • If my consulting business picks up (and other clients are willing to pay me more $) then as a 1099 contractor it'd be easier to work fewer hours for this company and just bill them for fewer hours (we'd still have to discuss it, of course, but it'd be easier to execute than as a W2 employee).
    • If my consulting business slows down (and I have time to spare and could use the cash), then as a 1099 contractor it'd be easier to work more hours in one month and then go back down to my usual number the next month. If I were a salaried W2 employee then I don't see how this could work
  • I'd have more flexibility on taking vacation (very important to me), even if it means it's unpaid. This is one of those companies that has an “Unlimited PTO” policy that doesn't actually exist; they actively discourage people from taking time off and employees struggle to get more than 2 weeks approved per year. I, however, am looking to take full advantage of finally being self-employed and am committed to taking off at least 4 weeks per year. I've discussed this with the employer and they said that if I was a W2 employee they'd just ask that I work more hours the week before or after to make up for it (e.g. work 0 hours during the vacation week and an extra 20 hours the next week to make up for it.) This effectively means that I wouldn't actually be getting PTO as a W2 employee (since I'd have to make up for the hours), which is pretty lame. I'm also nervous about what happens if my wife and I decide to take a 3 week vacation. I'd rather have that be unpaid vacation and work just 20 hours that month, rather than having them deny my request or having to work insane hours before/after the vacation to make up for the lost time
  • This is purely psychological, but I’d feel more independent as a 1099 contractor, which is half the reason I'm switching to consulting in the first place
Questions
  • Is it just me, or is the 1099 the obvious option for my situation as long as they'll pay me ~25% more than as a W2 employee?
  • My wife and I plan to buy a house in the next 9-18 months; do you think a mortgage lender may be more reluctant to approve a loan for someone with 1099 income vs. W2 income? We have 20% down payment + a 18 month emergency fund in CDs, but consulting income will vary month to month and may be seen as less reliable income
To those who reply, thank you in advance for your time and wisdom! I'm forever grateful for the help I've received here.

Edit: just to clarify, regardless of whether I choose to be W2 or 1099 with this client, I'll be a 1099 contractor to other clients
Last edited by coopermonster on Sun Apr 15, 2018 5:02 pm, edited 1 time in total.

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ClevrChico
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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by ClevrChico » Sun Apr 15, 2018 4:52 pm

Have you calculated liability/E&O insurance into the 1099 rate? Since we're a risk adverse group here, I'd suggest having that lined up first if going 1099, as it can take some time.

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coopermonster
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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by coopermonster » Sun Apr 15, 2018 4:56 pm

Good question. I didn't include that in the above consideration because I'll need liability/E&O insurance regardless of whether I choose W2 or 1099 for this client, since I'll be working as a 1099 contractor for other clients. On that note... time to hunt for a good policy...

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by cadreamer2015 » Sun Apr 15, 2018 5:14 pm

Your mortgage lender will probably want to see 2 years of past tax returns showing your self employment income. I know my lenders all asked for that when I applied for a mortgage while self employed. Kind of hard to produce that if you are just starting as a 1099 contractor. If getting a mortgage based at least in part on your income is important I’d get that squared away before switching to 1099 status. Perhaps you could start out as W2 and then switch to 1099 after you get your mortgage.
De gustibus non est disputandum

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by golfCaddy » Sun Apr 15, 2018 5:18 pm

Don't forget FICA taxes.

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coopermonster
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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by coopermonster » Sun Apr 15, 2018 5:33 pm

cadreamer2015 - That's what I feared; despite all the other reasons for going the 1099 route, if W2 will make it easier to get approved for a mortgage (since my consulting business is new as of 2018 and we'd be buying in 2019), then I suppose that may be the more prudent route. :confused

golfCaddy - Good call, though thankfully the employer is willing to pay me ~25% more as a 1099 contractor in order to compensate for FICA / payroll taxes, benefits, etc.

Anyone else have strong opinions one way or another? Particularly on the mortgage lending piece... I should have strong-but-variable consulting income by the time we buy in 2019, but my consulting biz won't even appear on my tax return until I file for 2018 in April 2019, so I won't have much to show other than bank statements or contracts.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by snowman » Sun Apr 15, 2018 6:30 pm

The advise you received on mortgage is 100% correct! 2 years of your personal tax returns is the minimum requirement. Some lenders will ask for more paperwork and it may take 2-4 month to finally get approved. Or it may fall through, you just never know. Speaking from experience - been in the 1099 shoes for almost 20 years. So if getting mortgage is important to you, absolutely no 1099 route until you close on the house!

I chose 1099, but I am a risk taker and was fed up with corporate world. It's not easy - at least these days there is ACA for health insurance. Your calculations are correct, but they are missing the element of surprise - it's all good until it isn't. Contract doesn't get signed until 6 months later; billing department is late paying; contracted amount goes down; downturn in economy means contractors get cut first, etc etc. It's much harder to fire an employee than to let contractor go. It may happen any time - be prepared for that possibility.

Having said all that, I would still choose 1099. The flexibility you get come tax time is enormous! With an S-Corp, you decide what your W-2 will look like vs. your profit, what the employee contribution to your i401k will be, how much your company will contribute etc. You also control your expenses and deductions. BTW, I chose S-Corp mostly for liability reason, based on advise from CPA and lawyer. Insurance ended up being really big expense, so you may want to start gathering quotes before you make a jump.

Hope this helps. If you have specific questions, feel free to ask.

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coopermonster
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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by coopermonster » Sun Apr 15, 2018 8:38 pm

snowman - thanks for your thoughtful response! Your comments on flexibility resonate strongly with me.

My wife and I are talking this through in real time, and we're still leaning toward 1099.

There's a psychological component to this that I didn't really get into in my original post: I, too, am fed up with the corporate world (we all are, but I more than most) as well as many aspects of this particular company. When I gave them notice I was expecting to make a clean break, but the consulting agreement we're now negotiating would allow me to do all the work I actually love while stepping back from the politics I hate. I fear a W2 arrangement would still leave me feeling tethered and subject to company policies and norms that don't sit well with me.

There are indeed risks inherent in 1099 vs W2, but I'll be a 1099 contractor for other companies regardless, and this particular company is willing to pay me +25% more as a 1099 contractor, making most W2 benefits moot. The mortgage lending piece still looms large, but my wife and I just discussed, and we're fine pushing out a home purchase by an extra year to give us 2 years of 1099 tax returns. We plan to move away from the Bay Area sometime in 2018, but we still don't know where and it'd make sense for us to rent for 1+ before buying to be sure we know the area and buy the "right" house we're happy living in for 10+ years.

Update: we've now received quotes for liability insurance:
  • General liability insurance: $500/yr for $1M/$2M from The Hartford
  • Professional liability (E&O): $1,258/yr for $1M/$2M from Philadelphia Indemnity Insurance Co.

Spirit Rider
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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by Spirit Rider » Mon Apr 16, 2018 12:29 am

Normally, I would consider a 25% IC premium over W-2 as insufficient. However, as an anchor for other IC contracts with the flexibility of hours it pulls above its weight.

I don't know if this is still relevant. When I tried to get a mortgage with less than two years of IC earned income. They took my earned income to date and divided by 24 to get my monthly income. Put another way, I got credit for 15/24 (62.5%) of my average monthly IC earned income for less than two years.

Because of this, I was unable to get government backed mortgage (pretty much all mortgages). Luckily mortgage holders had tons of foreclosures in inventory. They were willing to issue their own portfolio mortgage for one of those properties, because they already owned the property and were not risking any additional capital.

If the same under writing rules are in place and you want to go down this path. You should try to maximize your earnings such that when they are diluted by not having two years of earned income your credited average monthly earnings are sufficient to qualify for the mortgage you want.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by jayhawkerbeef » Mon Jul 30, 2018 2:14 pm

Sorry for resurrecting an old thread, but have an opportunity for a role and they are giving to the option of W2 vs 1099. Although they are really recommending 1099, even though the rate was quoted as W2. I happen to have an LLC for some old side gig stuff and happened to mention it, which was when they really pushed corp to corp

Based on what I read on this post and elsewhere on this forum, W2 is the way to go when the rate is essentially the same? Also no benefits, vacation, etc for both. Also, not sure this role is classified correctly as I will be using client provided machines, working from their office daily, etc. They did offer a 4% rate increase to go corp to corp, but I’m not sure that’s incentive enough. Anyways any advice other than what’s been mentioned above would be greatly appreciated.

Thanks
Last edited by jayhawkerbeef on Mon Jul 30, 2018 3:14 pm, edited 2 times in total.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by Dottie57 » Mon Jul 30, 2018 2:22 pm

golfCaddy wrote:
Sun Apr 15, 2018 5:18 pm
Don't forget FICA taxes.

Bingo. Big expense.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by Spirit Rider » Mon Jul 30, 2018 3:49 pm

Dottie57 wrote:
Mon Jul 30, 2018 2:22 pm
golfCaddy wrote:
Sun Apr 15, 2018 5:18 pm
Don't forget FICA taxes.
Bingo. Big expense.
Ditto. Even if their are no benefits. The client is saving on a 1099 vs. W-2; the 7.65% employer share of FICA, a minimum of $420 in Federal/State unemployment insurance, Worker's Compensation insurance, etc...

I would not begin to to think about 1099 vs. W-2 with < a 15% premium + benefit difference. At 4%, they are stealing from you.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by jayhawkerbeef » Tue Jul 31, 2018 5:45 am

Does being able to contribute to a retirement plan (i.e. solo 401k) give 1099 any advantage? Guess I hope to land a permanent role, just not sure how long that’ll take.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by rkhusky » Tue Jul 31, 2018 6:50 am

The IRS has rules for determining whether you are an employee or a contractor (and potential penalties if the wrong one is chosen):
https://www.irs.gov/newsroom/understand ... esignation

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by jayhawkerbeef » Tue Jul 31, 2018 7:44 am

rkhusky wrote:
Tue Jul 31, 2018 6:50 am
The IRS has rules for determining whether you are an employee or a contractor (and potential penalties if the wrong one is chosen):
https://www.irs.gov/newsroom/understand ... esignation
Yes, that part frightens me the most. Found a matrix online that assists with the proper work type classification and this role would never qualify for 1099 by the irs.

What’s more odd is the contract company has called me twice pushing 1099 and even offered up their CPA that could save me tons of money in taxes. Similar to investing, if I don’t understand it I leave it alone. So going W2. Thanks everyone.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by ArmchairArchitect » Tue Jul 31, 2018 8:49 am

I much prefer W2 due the potential liability of being 1099. As a W2, you are MUCH better protected, and don't need liability insurance. Plus employer FICA tax is covered by the employer so you're not paying the self-employment tax. Now, with the 2018 tax changes and 20% savings for self-employed persons, there's an advantage to 1099 to look into there:

https://www.corporatemonkeycpa.com/2018 ... w2-salary/

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by soccerdad12 » Tue Jul 31, 2018 9:02 am

As a 1099 the payment terms might not be as good. If you are direct to a company then they may sometimes loose your invoice, pay you net 60, etc. Also that payment can be clawed back if there is some issue. That won't be the case with W2.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by RickBoglehead » Tue Jul 31, 2018 9:26 am

As to liability, make sure to address that in your contract with them. Depending on what you're actually doing for them, if it involves your opinions, you can simply state that you provide opinions that do not guarantee success and have no liability should a desired outcome not occur.
Last edited by RickBoglehead on Tue Jul 31, 2018 10:20 am, edited 1 time in total.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by caffeperfavore » Tue Jul 31, 2018 9:34 am

I'm a 1099, doing work as a sub for a few different companies. One thing I haven't seen mentioned is the ability to set up an S-Corp and take your earnings in the form of a reasonable salary and dividends. Dividends are not subject to FICA. Depending on your income, this, along with the Solo 401k advantages may make the 1099 route make more financial sense.

However, my wife is a W2 so our health insurance comes through here, so I haven't had to think through that piece of the puzzle. YMMV, of course and I understand how that might tip the scales in one direction or another.

Someone mentioned liability. Liability and E&O insurance is not that expensive for many fields. I pay around $300 a year for $1M in liability insurance.

For me, I've loved being a 1099. Even though a good chunk of my income comes from a former employer, it all feels very different. I have so much more freedom than I ever did before. It's also nice being free of all the staff meetings, performance reviews, mandatory training, etc.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by Spirit Rider » Tue Jul 31, 2018 9:53 am

jayhawkerbeef wrote:
Tue Jul 31, 2018 7:44 am
rkhusky wrote:
Tue Jul 31, 2018 6:50 am
The IRS has rules for determining whether you are an employee or a contractor (and potential penalties if the wrong one is chosen):
https://www.irs.gov/newsroom/understand ... esignation
Yes, that part frightens me the most. Found a matrix online that assists with the proper work type classification and this role would never qualify for 1099 by the irs.
There is absolutely no reason to be frightened. As a practical matter rhusky is engaging in Fear, Uncertainty and Doubt (FUD). While the issue raised is a legitimate concern for a client. It is irrelevant for a potential contractor if it is to your advantage.

The responsibility for classification is on the client/employer not the contractor/employee. If the IRS has determined workers were misclassified as contractors, it is entirely the employer's responsibility for the non-payment of employment taxes. I have never heard of a single negative consequence to a misclassified contractor.

In fact, except for CA after a recent SCOCA ruling. It is relatively easy for the working relationship/control of most professionals to be structured in practice and contract to meet IRS requirements as an Independent Contractor.

Over my career, I have seen hundreds of ICs hired at many different companies including five (5) from the Fortune 500. Most of those were hardware/software consultants doing jobs not much different than employees. Many were either vetted by internal or external compliance questionnaires or IRS Form SS-8 approved. Like I said it is relatively easy for a company to meet IRS requirements by having a hands-off relationship and relinquishing a little control with minimal impact or even increasing the contractor's effectiveness. In fact, it was often helpful in reining micro-managers.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by jayhawkerbeef » Tue Jul 31, 2018 10:42 am

All good points. Again, in my case since the rates are essentially equal, w2 vs 1099, then w2 has the advantage. My attempt to gross up the rate for 1099 wasn’t allowed.

Plus I’m in the mortgage process, which w2 is superior there for income validation.

This is also in technology and always the likelihood of layoffs, which UE is also available on w2. So we left it w2 to start and switch to 1099 down the road if it ever made sense. This is the first year of the new tax law and can evaluate how the proposed benefits ripple through, then go from there.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by vitaflo » Tue Jul 31, 2018 10:58 am

jayhawkerbeef wrote:
Tue Jul 31, 2018 5:45 am
Does being able to contribute to a retirement plan (i.e. solo 401k) give 1099 any advantage?
Yes because of higher contribution limits, and you can invest in whatever you want not what the employer forces you into.

But yes, if rates are equal, go W2. More risk is moved the the employer in W2. With 1099 you take on more risk which must be compensated. If it's not, then it doesn't make sense to take the risk. Simple as that.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by rkhusky » Tue Jul 31, 2018 12:59 pm

Spirit Rider wrote:
Tue Jul 31, 2018 9:53 am
The responsibility for classification is on the client/employer not the contractor/employee. If the IRS has determined workers were misclassified as contractors, it is entirely the employer's responsibility for the non-payment of employment taxes. I have never heard of a single negative consequence to a misclassified contractor.
I would not advise knowingly breaking the rules just because you are unlikely to be caught or penalized. Much better to restructure the job so that it is clearly that of an independent contractor, as you suggest later.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by soccerdad12 » Tue Jul 31, 2018 1:03 pm

You can't get paid hourly and pass the 1099 test. There has to be a chance that you can lose money and if you are paid for every hour you work regardless of the outcome then you are W2. What you really need to do to be legal is fix bid each project. If you don't meet the agreed deliverables then you don't get paid. The company also has no say in who you have do the work. If it has to be you, then you are W2. Not my rules, but that's the way the IRS looks at it. Good luck.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by Spirit Rider » Tue Jul 31, 2018 4:42 pm

soccerdad12 wrote:
Tue Jul 31, 2018 1:03 pm
You can't get paid hourly and pass the 1099 test. There has to be a chance that you can lose money and if you are paid for every hour you work regardless of the outcome then you are W2. What you really need to do to be legal is fix bid each project. If you don't meet the agreed deliverables then you don't get paid. The company also has no say in who you have do the work. If it has to be you, then you are W2. Not my rules, but that's the way the IRS looks at it. Good luck.
This post is absolutely false!

The vast majority of ICs are in fact paid an hourly contract rate. There are no litmus tests where a single characteristic prevents IC status. The IRS uses the totality of the behavorial/financial control and working relationship.

I have been on both sides of the client/IC relationship. I have been personally and had many hourly ICs vetted by corporate compliance departments and third party compliance companies. I also have been and had many hourly IC engagements approved on Form SS-8.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by soccerdad12 » Tue Jul 31, 2018 4:44 pm

Spirit Rider- you have turned in a SS-8 to the IRS on a 1099 hourly project you were on and they came back and said you are fine as an IC?

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by Spirit Rider » Tue Jul 31, 2018 4:48 pm

rkhusky wrote:
Tue Jul 31, 2018 12:59 pm
Spirit Rider wrote:
Tue Jul 31, 2018 9:53 am
The responsibility for classification is on the client/employer not the contractor/employee. If the IRS has determined workers were misclassified as contractors, it is entirely the employer's responsibility for the non-payment of employment taxes. I have never heard of a single negative consequence to a misclassified contractor.
I would not advise knowingly breaking the rules just because you are unlikely to be caught or penalized. Much better to restructure the job so that it is clearly that of an independent contractor, as you suggest later.
Where did you get the idea that I suggested breaking any rules. You conviently and deceptively took this section out of context of my entire post. Where I clearly stated that the client can clearly structure the contractual relationship. The snippet that you did post is entirely consistent with my entire post.

So is it your habit to add deception to justify you FUD?

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by bhsince87 » Tue Jul 31, 2018 4:53 pm

Spirit Rider wrote:
Tue Jul 31, 2018 4:42 pm
soccerdad12 wrote:
Tue Jul 31, 2018 1:03 pm
You can't get paid hourly and pass the 1099 test. There has to be a chance that you can lose money and if you are paid for every hour you work regardless of the outcome then you are W2. What you really need to do to be legal is fix bid each project. If you don't meet the agreed deliverables then you don't get paid. The company also has no say in who you have do the work. If it has to be you, then you are W2. Not my rules, but that's the way the IRS looks at it. Good luck.
This post is absolutely false!

The vast majority of ICs are in fact paid an hourly contract rate. There are no litmus tests where a single characteristic prevents IC status. The IRS uses the totality of the behavorial/financial control and working relationship.

I have been on both sides of the client/IC relationship. I have been personally and had many hourly ICs vetted by corporate compliance departments and third party compliance companies. I also have been and had many hourly IC engagements approved on Form SS-8.

I agree. My employer employs contractors at an hourly rate, and have done so for 20+ years. In fact, they bill in 1/4 hour increments. They work side by side with W-2 employees. Typical rate is 1.25X W-2 pay. As a manager, I ran about 25% 1099 employees, 75% W-2.

Their biggest perk is flexibility of schedule. Our compliance officer tells us we can't dictate their hours. So within reason, they come and go as they please, take extended vacations, etc.

Another "perk" is that we sign yearly contracts. If there were ever to be layoffs, we would need to pay them until the current contract expires.

I've been toying with the idea of going that route myself, just so I can go to part time work. I haven't quite figured out a solution to the health insurance issue yet, though.
Retirement: When you reach a point where you have enough. Or when you've had enough.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by Spirit Rider » Tue Jul 31, 2018 4:59 pm

soccerdad12 wrote:
Tue Jul 31, 2018 4:44 pm
Spirit Rider- you have turned in a SS-8 to the IRS on a 1099 hourly project you were on and they came back and said you are fine as an IC?
I did not for my own engagement, because the it is the client who submits the Form SS-8 and had it approved.

I have submitted Form SS-8s on behalf of the client (one of small companies I worked for) for hourly ICs. Vetting is handled by compliance departments or third parties at large companies. They usually have position templates available, because it is too much hassle for individual IC SS-8 approval.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by metrunt » Tue Jul 31, 2018 5:13 pm

To restate, any rules about classification are for the employer, not the employee/ contractor. Despite what some are implying here, there simply aren't rules for you to break.

There are also few clear cut rules about classification. Hourly pay, possibly taking a loss, working on site, being under direct supervision, maintaining one's own liability insurance, those are all factors that may go into a review by an auditor (usually by state unemployment, Fed IRS, state tax dept) but no single one or collection of several will necessarily be in violation. I've seen one company be held in violation and another with identical practices not be in violation in the same year.

And if there is a violation, again, it is by the employer, not by the employee.

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Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by rkhusky » Tue Jul 31, 2018 6:47 pm

Spirit Rider wrote:
Tue Jul 31, 2018 4:48 pm
rkhusky wrote:
Tue Jul 31, 2018 12:59 pm
Spirit Rider wrote:
Tue Jul 31, 2018 9:53 am
The responsibility for classification is on the client/employer not the contractor/employee. If the IRS has determined workers were misclassified as contractors, it is entirely the employer's responsibility for the non-payment of employment taxes. I have never heard of a single negative consequence to a misclassified contractor.
I would not advise knowingly breaking the rules just because you are unlikely to be caught or penalized. Much better to restructure the job so that it is clearly that of an independent contractor, as you suggest later.
Where did you get the idea that I suggested breaking any rules. You conviently and deceptively took this section out of context of my entire post. Where I clearly stated that the client can clearly structure the contractual relationship. The snippet that you did post is entirely consistent with my entire post.

So is it your habit to add deception to justify you FUD?
Sounds like someone got up on the wrong side of the bed this morning. By suggesting that the responsibility lies entirely with the hiring company, one could easily infer that you are suggesting that workers go along with whatever works best for them, even if they know better. And I did note that you suggested restructuring the job description.

caffeperfavore
Posts: 78
Joined: Thu Aug 06, 2015 11:45 am

Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by caffeperfavore » Wed Aug 01, 2018 8:20 am

metrunt wrote:
Tue Jul 31, 2018 5:13 pm
To restate, any rules about classification are for the employer, not the employee/ contractor. Despite what some are implying here, there simply aren't rules for you to break.

There are also few clear cut rules about classification. Hourly pay, possibly taking a loss, working on site, being under direct supervision, maintaining one's own liability insurance, those are all factors that may go into a review by an auditor (usually by state unemployment, Fed IRS, state tax dept) but no single one or collection of several will necessarily be in violation. I've seen one company be held in violation and another with identical practices not be in violation in the same year.

And if there is a violation, again, it is by the employer, not by the employee.
Second this as a long time 1099. And also second that it has nothing to do with being hourly or not. I've worked many, many hourly based projects for different employers over the past decade. These are not things for the OP to be concerned about at all.

jayhawkerbeef
Posts: 246
Joined: Tue Jul 22, 2014 11:10 am

Re: Consultant leaning toward 1099 instead of W2 and looking for advice

Post by jayhawkerbeef » Thu Aug 02, 2018 9:17 am

The below link might be helpful at least directionally to see the comparison of 1099 vs w2 impact on income. It’s probably not completely comprehensive.

https://www.viewthenumbers.com/w2-vs-1099

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