Advise on side gig w2 or independent contractor

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
Gpstm
Posts: 13
Joined: Sat Mar 16, 2019 3:59 pm

Advise on side gig w2 or independent contractor

Post by Gpstm »

Hello fellow bogleheads,
My sisters full time job as nurse practitioner pays her 150k+ annual income. She wants to start a side job. Has one offer that will hire her as w2 and pay 100$/hr. The other offer pays 115$/hr as 1099. She will be working enough hours to make roughly 25-30k per year. Which job w2 or IC would benefit her better as far as taxes or can she accept both jobs so she can find some work every week between the two places
TIA
tibbitts
Posts: 23716
Joined: Tue Feb 27, 2007 5:50 pm

Re: Advise on side gig w2 or independent contractor

Post by tibbitts »

Gpstm wrote: Fri Apr 12, 2019 9:12 pm Hello fellow bogleheads,
My sisters full time job as nurse practitioner pays her 150k+ annual income. She wants to start a side job. Has one offer that will hire her as w2 and pay 100$/hr. The other offer pays 115$/hr as 1099. She will be working enough hours to make roughly 25-30k per year. Which job w2 or IC would benefit her better as far as taxes or can she accept both jobs so she can find some work every week between the two places
TIA
I would guess that if all else was equal (no benefits, no difference in insurance requirements, etc.) being an IC would be more profitable and possibly allow for more tax deferred income. On the other hand there may be a little more effort involved in the IC route - more complicated taxes, etc. And if you have three jobs you might not want running your own business to be your fourth.
JBTX
Posts: 11227
Joined: Wed Jul 26, 2017 12:46 pm

Re: Advise on side gig w2 or independent contractor

Post by JBTX »

Will she need additional liability or malpractice insurance if she is 1099?
Topic Author
Gpstm
Posts: 13
Joined: Sat Mar 16, 2019 3:59 pm

Re: Advise on side gig w2 or independent contractor

Post by Gpstm »

Liability insurance is covered at both places. The 2nd w2 job makes her sign a non compete which will make it difficult for her to find further jobs in the area.
Spirit Rider
Posts: 13977
Joined: Fri Mar 02, 2007 1:39 pm

Re: Advise on side gig w2 or independent contractor

Post by Spirit Rider »

This is actually one case where even if the two jobs were paying the same, being an IC would pay more. A W-2 moonlighting employment will require 7.65% FICA be deducted. Since the SS maximum wage base have been reached in the primary W-2 employment. The SE self-employment will only require 2.9% SE Tax.

To me the IC job would be a better option. She would be receiving more compensation, could adopt an employer retirement plan and make additional retirement plan contributions and other benefits.

The malpractice and liability insurance issues should be investigated. In some cases the client will provide malpractice insurance, but if not that cost must be factored in.
User avatar
MP123
Posts: 4084
Joined: Thu Feb 16, 2017 2:32 pm

Re: Advise on side gig w2 or independent contractor

Post by MP123 »

The 1099 side gig opens up self employed deductions like i401k, health insurance, travel, and so on.

These may not be relevant or allowed depending on the circumstances but could be valuable.

The non compete with the W2 offer sounds like a bad idea.
tibbitts
Posts: 23716
Joined: Tue Feb 27, 2007 5:50 pm

Re: Advise on side gig w2 or independent contractor

Post by tibbitts »

Gpstm wrote: Fri Apr 12, 2019 9:58 pm Liability insurance is covered at both places. The 2nd w2 job makes her sign a non compete which will make it difficult for her to find further jobs in the area.
The non-compete doesn't really make any sense in this context - it's not negotiable? I had a non-compete in an IC contract once but was able to have it removed. On the other hand, two jobs would be enough for some of us.

I'm not familiar with the industry, but in mine it's unusual that insurance would be the same for an employee and an IC.
LongRoad
Posts: 261
Joined: Mon Dec 31, 2018 1:00 pm

Re: Advise on side gig w2 or independent contractor

Post by LongRoad »

Though I don’t work in healthcare, there’s no way I’d sign a non-compete to take a side gig. Do you know any of the details?

Edit: Maybe if it only applies for the duration of that job? But otherwise it makes no sense.
koryg75
Posts: 121
Joined: Sun Feb 01, 2015 7:48 am

Re: Advise on side gig w2 or independent contractor

Post by koryg75 »

As an advanced practice nurse I’m in the same situation. I chose IC because, while it involves a little more hands attention, financially it’s well worth it with the business expenses write offs and the SEP. Now if she or her partner isn’t interested in keeping track of expenses and dealing with quarterly taxes then it’s another story. Although it’s really not much effort for the payoff.
And there are way too many jobs out there in healthcare (assuming she’s not out in the country) to put up with a non compete for a side gig.
kaneohe
Posts: 6786
Joined: Mon Sep 22, 2008 12:38 pm

Re: Advise on side gig w2 or independent contractor

Post by kaneohe »

Spirit Rider wrote: Fri Apr 12, 2019 10:10 pm This is actually one case where even if the two jobs were paying the same, being an IC would pay more. A W-2 moonlighting employment will require 7.65% FICA be deducted. Since the SS maximum wage base have been reached in the primary W-2 employment. The SE self-employment will only require 2.9% SE Tax.

.....................................................
bu wouldn't the SS w/h be returned at yr end since the max w/h was reached w/ the primary job?
Spirit Rider
Posts: 13977
Joined: Fri Mar 02, 2007 1:39 pm

Re: Advise on side gig w2 or independent contractor

Post by Spirit Rider »

kaneohe wrote: Sat Apr 13, 2019 2:38 pm
Spirit Rider wrote: Fri Apr 12, 2019 10:10 pm This is actually one case where even if the two jobs were paying the same, being an IC would pay more. A W-2 moonlighting employment will require 7.65% FICA be deducted. Since the SS maximum wage base have been reached in the primary W-2 employment. The SE self-employment will only require 2.9% SE Tax.
bu wouldn't the SS w/h be returned at yr end since the max w/h was reached w/ the primary job?
Good point. I know that, but somehow it didn't register when I was replying. Maybe because I am often comparing S-Corps to sole proprietors and in that case you don't get the employer share of the SS component back.

You would be out the 6.2% for the whole year and refunded with your tax return, the 1.45% MC component is not refundable and you would end up paying 1.45% more as self-employed.
JBTX
Posts: 11227
Joined: Wed Jul 26, 2017 12:46 pm

Re: Advise on side gig w2 or independent contractor

Post by JBTX »

Spirit Rider wrote: Sat Apr 13, 2019 3:07 pm
kaneohe wrote: Sat Apr 13, 2019 2:38 pm
Spirit Rider wrote: Fri Apr 12, 2019 10:10 pm This is actually one case where even if the two jobs were paying the same, being an IC would pay more. A W-2 moonlighting employment will require 7.65% FICA be deducted. Since the SS maximum wage base have been reached in the primary W-2 employment. The SE self-employment will only require 2.9% SE Tax.
bu wouldn't the SS w/h be returned at yr end since the max w/h was reached w/ the primary job?
Good point. I know that, but somehow it didn't register when I was replying. Maybe because I am often comparing S-Corps to sole proprietors and in that case you don't get the employer share of the SS component back.

You would be out the 6.2% for the whole year and refunded with your tax return, the 1.45% MC component is not refundable and you would end up paying 1.45% more as self-employed.
The other thing you don't think about and isn't a likely issue but could be is collectibility of your invoices. Employees are much higher up the food chain in a bankruptcy than unsecured creditors. There are things you can do, I did 1099 work for a company that was pretty much known to be heading for bankruptcy. Thankfully I collected everything and was able to satisfy (repel) claw back efforts stating I was given preference items.

Or it may just be a dispute of work or billing. Employees must be paid. Independent contractors are treated like any other vendor based upon contract law.

In this case I would think liability would be a big issue
Post Reply