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Subject:Re: QUESTION: W-2 vs. 1099 Hourly Rates From:Melissa Fisher <mfisher -at- MOBSEC -dot- COM> Date:Tue, 23 Dec 1997 11:20:37 -0500
The issue really has less to do with how much you should get paid, than
with how much you will end up paying in taxes.
If you are a w-2 employee of a company, that company, in addition to
withholding your share of federal and state income taxes, pays some kind
of extra federal taxes (I don't know what they are, but I'm sure someone
out there does).
If you are a 1099 employee, you have to pay these taxes yourself, plus
(I think) a self-employment tax. (Maybe you pay just the self-employment
tax; I don't know - that's why I hire an accountant!) I don't know the
details of what all the taxes are, but the total is no small
percentage...on a recent consulting contract my husband finished (as a
1099 employee), our total tax bill for the job came out to be 49.3% of
the income. Ouch!
Hence, if you will be working on a 1099 basis, it may behoove you to
increase your hourly rate to take into account for the tax bill. Of
course, I'm neither an accountant nor a tax expert. Check with the IRS
for details, I think they have an 800 number that isn't too impossible