Self employment?

[Tollster]

I was offered a job in my field of expertise, but the company uses a 1099 form, so there is no withholdings of tax, fed, state, and local. Does any here have any idea on what percentage I could expect to pay at years end? I ready to jump of the edge, but want to ensure the amount they pay per hour without taxes is comparable to what I normally would make without the hassle.. I would also give up any unemployment compensation if it turned out to be too slow. It has its good sides and bad I recon, but the tax part is the most important.
If that makes any sense.. All expenses are paid at federal rates, or what ever the cost is if less.
`Tol

 

[brin]

I was offered a job in my field of expertise, but the company uses a 1099 form, so there is no withholdings of tax, fed, state, and local. Does any here have any idea on what percentage I could expect to pay at years end? I ready to jump of the edge, but want to ensure the amount they pay per hour without taxes is comparable to what I normally would make without the hassle.. I would also give up any unemployment compensation if it turned out to be too slow. It has its good sides and bad I recon, but the tax part is the most important.
If that makes any sense.. All expenses are paid at federal rates, or what ever the cost is if less.
`Tol

Talk to your accountant about forming a subchapter S corporation....commonly called a Sub-S Corp. this allows you to shield yourself from liability but also to be taxed as an individual...you set your own salary and pay quarterly taxes only on that...deduct your allowable expenses and whatever is left you take as a dividend on a K-1 at the end of the year..that is not subject to social security or medicare taxes only a dividend tax...I am not a CPA so do some research and ask a CPA about all the tax advantages...Good Luck

 

[smstonypoint]

You can use IRS Form 1040-ES to get an idea of the amounts you would have to pay in the way of quarterly estimated Federal income and FICA taxes: http://www.irs.gov/pub/irs-pdf/f1040es.pdf. Your state may (and probably does) require quarterly estimated state income tax payments.

Good luck.

Steve

 

[MacLawn]

Yep, I've been doing it for 35 years, self employed contracting my services. I pay 100% of my SS, 15.3% I think it is, plus regular taxes federal and state quarterly. You gotta do this!! Then, health insurance, which for us two is $1,150 per month includes dental. So, you've got to have some lucres coming in before you can even think of buying bacon.

 

[TnAndy]

Federally, it will depend on your tax rate. I did it for years, but since my wife had a pretty good job, her income put us right at the 28% threshold, meaning every dime I earned was taxed at 28%. Then there was the 15.3% Social Security/Medicare 'contribution'....so basically I gave 43.3% of my income to Uncle Sam. Really inspires you to get out of bed, huh ?

Then you have State income taxes to consider in your State ( none here in TN ).

What I did was move my income from construction income to rental income and capital gains. I'd build a house, rent it for a year ( No 15.3% SS tax ), then sell it after a year for capital gains instead of ordinary income......20% capital gains versus 28% income. So I reduced my taxes from 43.3 to 20%.

It's all in HOW you make your money....ask Warren Buffet.

 

[woodlandfarms]

I am a 1099 sort of employee. As noted, an LLC or S Corp are a must. It al comes down to tax writeoffs at the end of the day, your home office, or rented office, you supplies, education and needs can be deducted, but as noted, you have to pick up your own health insurance which is brutal and many times you cannot get it, and you may also need some form of corporate liability insurance as well.

Also, you need to check the legality of you being paid via invoice (1099). The IRS is clamping down on employers and employees who are wrongfully employed as such. You say you are a welding inspector, If you determine your own hours, and you provide a finalized "response" and you do not have to report through the process, you can probably be 1099'd. But if you are just labor (there are a number of bosses above you), you may not legally qualify.

Employers are getting killed in the tax / health care costs dilema and looking for ways to get back to profitability. This is an easy way to save between 20 and 30% on your labor costs (putting people on invoice). But if you as an employer get caught, and the people you paid 1099 are really employees, you have to pay back that 20 to 30%.

Best advice is get an accountant who is savvy to your type of business.

Carl

 

[Steppenwolfe]

I have been self employed for 30 years. You had better get your ducks in a row for the IRS. They Do Not play around with this. You are looking at 25 to 35% for taxes. You also can not be paid by the hour, must supply your tools, vehicle, etc. Probably should also have your own workman's comp policy. Not to mention make quarterly tax payments. Go talk to a CPA. Beautiful area you are in...used to have a best friend in Stillwater.

 

[Tractor Seabee]

If your compensation as a contractor is not equal to what your client's total book cost of the same job done by an employee on their payroll then you are being robbed. This is a standard ploy by unscrupulous employers to get the work done at lower cost and they have recourse for mistakes, standby, you goof and they will refuse to pay as the work is not as contracted. As Carl stated above, the IRS in cahoots with the Dept of labor to crack down on workers being contractors when in reality they take orders directly from the clients supervisors. The test is; are you given a block of work, a deliverable product, and you choose how you do it and get paid for the final product. As an example piece work (contract) in construction has been virtually eliminated from commercial construction. I have a consulting business and my bill out cost is right at what it would cost the client to have a similar person on their payroll. My stock in trade is I am the go to company to provide the service when a client has excess work but not enough to hire a full time employee. Then, I am semi-retired and do not want to work full time. But I refuse to undercut the market for full time employees coming up the ladder.

Ron

 

[forgeblast]

Pa does require quarterly filing. For my spoon carving business I have to collect sales tax and file it electronically with PA. I also have to do this for every state I sell in. Once your set up its not bad, a buddy of mine who is getting natural gas royalties also pays his taxes on them quarterly using the same system.

 

[EarPlug]

Read this direct from the IRS - Independent Contractor (Self-Employed) or Employee?

 

[300UGUY]

If your compensation as a contractor is not equal to what your client's total book cost of the same job done by an employee on their payroll then you are being robbed. This is a standard ploy by unscrupulous employers to get the work done at lower cost and they have recourse for mistakes, standby, you goof and they will refuse to pay as the work is not as contracted. As Carl stated above, the IRS in cahoots with the Dept of labor to crack down on workers being contractors when in reality they take orders directly from the clients supervisors. The test is; are you given a block of work, a deliverable product, and you choose how you do it and get paid for the final product. As an example piece work (contract) in construction has been virtually eliminated from commercial construction. I have a consulting business and my bill out cost is right at what it would cost the client to have a similar person on their payroll. My stock in trade is I am the go to company to provide the service when a client has excess work but not enough to hire a full time employee. Then, I am semi-retired and do not want to work full time. But I refuse to undercut the market for full time employees coming up the ladder.

Ron

You are a good man. And smart, a lot of guys are getting screwed and don't even know it. And for most folks, SS is a good deal. Few folks will actually invest much, and fewer would invest well.

 

[grsthegreat]

You are a good man. And smart, a lot of guys are getting screwed and don't even know it. And for most folks, SS is a good deal. Few folks will actually invest much, and fewer would invest well.

errrr.. no it isnt.

My SS ..if its even around when i retire... wont net me much at all. It was never ment to LIVE on. it was supposed to just help with retirement.

The wife and I have been investing for 20 years. I have more than enough to live on when we retire, and we've just added 2 rental houses to the lot. No one said the govt owes you a living. Ive been self employeed for close to 30 years. Had a few paying jobs out of college, but found better pay and easier working conditions in self employment.

though my boss is a jerk (HA).

Just watch the IRS. If your only working for 1 person , and that 1 person contributes 100% of your pay...your nor self employeed. The IRS can come after you. just a heads up

 

[Tollster]

I have been a sub contractor for more than 27 years, no benefits, no retirement, only ROTH. Things have been slow in the Nuclear industry and now I have gained many certifications in various disciplines of NDE and QC/QA. Each has always been negotiated on an hourly rate.
I was presented an opportunity to perform oversight and consulting, but using a 1099 form at more than twice my sub contract rate (yes I have had to file quarterly too). The work is not out of the area within 150 miles one way, and would require me once a week. I know its slow, but it may present me with better opportunities than I have had working for someone else.
This subject has nothing to do with any current employer, nor substandard pay. It was about the tax issues. After 27 years traveling to 36 different nuclear plants and various refinery's and fossil facilities, I have always maintain a high level of integrity and professionalism. I am just looking for a change in an industry that has done more with less, with little care about a sub contractor.
This opportunity is not in the nuclear field at this time, however it is involved with energy.
Thank you for all the replies,
~Tol

 

[AlanB]

If you decide to go this way, insure that you have a good CPA doing your taxes. I would say in the ballpark numbers, figure on 1/3 to 1/2 of your pay going to various things I would call a tax.

 

[kenmac]

You've been given some good advise. Now seek the advise od a CPA. My CPA handles all my taxes and I haven't had any problems in 30+ yrs