1099 verus w2?
I normally prefer w2 but recently get more 1099 calls on job hunting.
I am used to thinking that one must make more 1099 to equal w2.
But is there some method to help figure this?
Answer:
You have to make 7.5% more upto approx first 80,000 of 1099 income in order to match with w2. All taxes are same. A few more points to consider:
1. You have to purchase professional insurance
2. You are not eligible for any employee benefits, unless employer provides at this will. Ex: Medical benefits.
3. If your jobs is for more than 6 months and you perform the job at employer's site: you have right to demand all employee benefits.
Venu
The key difference is that a 1099 is for an independent contractor, anda W2 is for a regular employee.
If you do free-lance work, then a 1099 is what you'll get at the end of the year.
If you're hired as a regular employee, your employer will send you a W2 at the end of the year.
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Not sure what you mean by "how much I would need in a 1099 to equal a w2 rate.".The rate has nothing to do with it. I'm confused.
If you're being paid on a W2 you are an employee. As such, the employer withholds FICA, Federal and state income taxes. The employer will also pay into the state unemployment insurance fund. If you're paid on a 1099, you're not an employee, you're an independent contractor. You're responsible for all of your own payroll taxes (FICA is approximately 15% of income after expenses) and your state and federal income tax.
The big difference for you is having to pay the employer portion of the FICA. If you're an employee your portion is withheld and the employer matches it. As a contractor you have to pay your portion and the employer matching which works out to approximately 15%. As an employee you are eligible for unemployment compensation, not so as an independent contractor.
If you incur expenses in doing your work.. uniforms, safety equipment, travel, etc.. these expenses are deductible on your Schedule C if you're on a 1099, not so if W2.
good luck!
Calculate how much tax you are going to have to pay on the 1099 wage at your tax level. Keep in mind, the more you make, the more the tax will be, so if you are going for a higher 1099 rate to cover taxes you are only creating more tax on that income.
The biggest difference is going to be on your FICA. When you are W-2, you pay 7.65% and the employer matches that. If you are 1099, you are required to pay the full 15% on your own. As far as backing into what you should be paid on 1099, that is the biggest piece of the equation. Everything else can be calculated off of a tax table which can be found on the IRS website for federal, and on your State Governments website for local.
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