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Subject:Re: Contract work - 1099 or W-2? From:beelia <beelia -at- gmail -dot- com> To:William Sherman <bsherman77 -at- embarqmail -dot- com> Date:Tue, 4 Jun 2013 20:26:54 -0700
This is exactly the sort of feedback I was hoping to get when I started
this thread. Thank you, General!
On Tue, Jun 4, 2013 at 6:12 PM, William Sherman
<bsherman77 -at- embarqmail -dot- com>wrote:
> Wow, I missed one of those discussions right up my alley.
> W-2 or 1099. It really isn't that simple.
> W-2 is if you are an employee. Most contracts you get calls about are
> really about you being an employee of the contract shop calling you. They
> bill the client. They pay you. It really is cut and dried but there are
> Lately, due to Obamacare (not a political statement), many businesses are
> trying to reduce their impact from the healthcare laws. As such, many
> contract shops are trying to recruit contractors on 1099s instead W-2s.
> This makes the contractor appear to not be an employee, saving them from
> the insurance issues, BUT this fails the IRS test for whether you are an
> employee or independent contractor. The difference in rates they offer as
> an incentive doesn't offset the expenses involved for you. For example, a
> recent job call was $38 max on W-2, if they really had to, but they would
> go $45 on 1099, which they really preferred. I would lose a lot more than
> the $7 per hour difference going 1099.
> W-2 if they set time, place, and other conditions on your work. If you
> know you can telecommute, and they insist you work in the office, you are
> an employee.
> The IRS, until this recent IRS problem, would get you on it as they were
> doing a lot of audits. (I was audited for 2009 and 2010. Passed both, with
> additional refund.)
> W-2 means you are an employee, and as such, you get unemployment benefits.
> With a 1099, you need to show you are a business. You need your office,
> business name, tax payment setup, and so on. You really are an independent
> business, so like IBM contracting to XYZ Corp, you set your hours and your
> schedule and they only specify a deadline, and unless the work cannot
> physically be done offsite, you set your work location.
> You have to pay your own taxes and Social Security. You are not eligible
> for unemployment, group health care rates, or other benefits. While most
> don't think about it, when you turn retirement age, you discover that while
> you made $100,000 plus for a few years on a 1099, SS has nothing for you
> because nothing was paid in. While hopefully no one here is relying on SS
> to retire, there is no sense in throwing it away, either.
> 1099 is often handled by billing cycles, typically 30-, 60-, or 90-days,
> although those trying to get around employee rules will pay weekly just
> like a paycheck. If they pay weekly on a 1099, it should be a clue this is
> a bit shady. This is how construction work handles illegal workers. You
> work, they pay you on a 1099, they wash their hands of whether you are
> legal, illegal, or anything.
> A 1099 should be realistically almost twice a W-2. In the other part of
> this thread, 15% cut was mentioned for the shop, but I know in the '80s and
> '90s most were running from 25% to 33% and some shady ones would run as
> much as 50% of the billing to the client. So if you are a 1099, figure you
> are your own shop, so that cut is now what needs to be tacked onto hat you
> be a decent rate for you.
> For example, if you work at $40 on W2, the shop is probably billing $60.
> Figure loss of UI during downtime. When a job ends, your mortgage,
> utilities, need for food don't stop. Normally much of this can be covered
> by UI to lessen your impact. I figure that my downtime is two and a half
> months average. I have walked from one job into another in a couple of
> weeks about as often as being out for 3 or 4 months. As such, I plan to
> survive for about 4 months without hitting real savings and only get
> nervous on jobs at 3 months. That is when I begin the real effort on
> getting a job.
> Take the $300 UI pay per week (varies great on state - believe you are
> California and last I saw that was like $480/week). $300 X 13 weeks (3
> months) is $3900. Spread that across your work period to see what that adds
> to your rate.
> ----- Original Message ----- From: "beelia" <beelia -at- gmail -dot- com>
> To: "Techwr-l" <techwr-l -at- lists -dot- techwr-l -dot- com>
> Sent: Thursday, May 30, 2013 2:57 PM
> Subject: Contract work - 1099 or W-2?
> If you have a choice between getting paid on a W-2 or a 1099, which would
>> you choose?
>> I am starting to do contracting again after over a decade of direct
>> "captive" employment, and I don't remember what the advantages/drawbacks
>> Can anyone direct me to a resource, or tell me what you've done in your
>> contracting careers?
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