Anyone have any experience with being self-employed, especially as a 1099 Contractor?

As I understand it, a company just pays you a set amount, and you pay your own withholding taxes, social security, etc.

My question is:
If they offer you, say, $60,000 per year, what would that equate to if you were just working for a salary as a direct hire?

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You're shy a few manners.

Jack, I did it for the previous 9 years and never completely figured it out.

First, there is Social Security, which is now,.. what 15.3%? You'll pay all of that since there is no employer match.

Beyond that, a lot will depend on your occupation and the deductions you'll be taking in support of it. If you can whittle down the gross you may do better than an employee. If not, you'll certainly pay more in the end.

To be a fully legal 1099 contractor you need to have a business licence (don't go sole proprietor, at least go S Corp for self protection), you need to be in control of your work hours and you'll be paying all your taxes. You also get a pile of deductions employees don't get like home office, car, operating expenses, etc. Many folks operate less than legal (like without a business licence) but I've seen what happens if they get caught and it ain't pretty and it's very expensive.

Talk to an accountant and a business lawyer about your particular situation because there's too many variables to give a simple answer.

I agree with elcruisr. I would get a accountant or business lawyer who has been in business for a good number of years. Check them out before doing business with them . Too many crooks out there. Its all good untill you get a call from the IRS!

+1 about the accountant. Even small time operations use a local CPA to keep them on the up-n-up.

Expect a heafty tax bill at the end of the year for SS and self-employment tax. Set up a S-Corp or LLC to protect yourself - CPA accountant can help with this - when you get your business lic - CPA will also help with this... Save any and all work related rec'ts for your accountant to use on your profit/loss IRS form. Track mileage if you use a personal vehicle for the work. The more you deduct for work-related expenses (i.e. reduce profit by expenses) the less you have to pay to Uncle Sam and Aunt Statie...

Its pretty close to 1/3 for taxes when all is said and done. About 28% total, atleast thats what it figured out to be when I did it.

Depending on the circumstances, there's a possible middle-ground option, which is to be paid as a "statutory employee", which eliminates the 2% expense deduction floor for regular employees, and allows some other tax advantages, without the aggravation and expense of actually setting up and operating a business as an outside contractor. Again, get some professional advice, which mine is not...

Thanks for all the responses.

Looks like at a minimum I need to go talk with a CPA.

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You're shy a few manners.

FYI, qualifying for mortgages and auto loans will require you to have a 2 year history of being self employed. Many people write off a lot of expenses to reduce their tax liability, but keep in mind your net income is what will be used to qualify for mortgages and auto loans.

I was a consultant for two years. The first thing I did was to find a CPA.

A previous poster pointed out about things which will be based on net income rather than gross income. I set up a Simple IRA for investing purposes. At the time I could write off
12,500 dollars for the retirement account. These type of accounts allow investing your first net dollar to your 12500dollars against net income. There is a tax deductible incentive by doing so.

In my view 1099 is a temporary means to make some money until you can be gainfully employed.

In summary 1099 work is not all good, but certainly not all bad.

jed

Good advice thus far.

You can count on losing 1/3 of your gross to taxes, so that $60k instantly becomes $40k. You'll also buy your own insurance, and you'll have to scramble if the contract dries up. Don't let the people you're working for tell you different.

When I work as a contractor, I ask a lot more than for doing the same job as an employee.


Okie John

I believe a 1099 contractor needs to show that he also does work for other people/businesses.

If you wait till the end of the year to settle up with the IRS and SS, you will most likely incur penalties for not filing estimated quarterly payments (Form 1099-ES).

Due Jan. 15, April 15, June 15 and September 15.

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Life Member NRA Since 1985