Independent Contractors taxes Vs Employee

Hi I am looking for a few answers if anyone knows something about being an independent contractor and how you are taxed.

I currently have a salaried job in CA and am looking at a independent contractors position up North which will be overall a 13% raise. The only thing is I will be an independent contractor which i have never been and I know my taxes will be more. I just want to know how much more compared to now. Which may swing me to ask for a raise at my company now.

I currently get a tax rate of around 15% for federal, 5% for state and around 8% for OASDI and medicare. Knowing I wont get taxed for state up north do I pay more for OASDI and medicare plus a higher federal income tax?

 

Your current employer pays (an exact match) the same as you for social security. You will pay that additional amount.

Federal taxes could be less if you spend money in certain ways to support being a contractor. If you incorporate yourself, you will be allowed protection (no piercing the veil) and if it's a sub type S the income can pass through as regular income & taxed as a typical individual.

 

As a 1099 independent contractor no taxes or anything are withheld from your pay. At tax time you will be required to file a schedule c which will include all your deductions and determine how much you will owe or are owed in taxes. Being a 1099 definitely has its advantages as you'll be able to write off a lot of expenses (gas, miles, meals, etc).

One thing to know about being a 1099 that a lot of people don't know is that the business you are contracting to has absolutely no say or control of you, your time schedule, etc. If the company attempts to control your time schedule for example, and the IRS finds out, it can restructure the businesses paperwork and change you over from 1099 to employee and demand all the necessary withholdings the company should have done if you were an employee from the beginning.

If you have any specific questions, I can try to help...

 

Definitely set yourself up as a LLC or PLLC depending on what you do and where you will be doing it. Yes, you have to pay double what you are paying now for SS (you are paying it all). Keep written records of all expenses related to doing your job (they are tax deductible). You have to pay all taxes and make deposits quarterly. Lots of information out there about doing this.

 

Great advice here. I have a personal LLC just for this reason. If I consult or contract myself out, it is always through my LLC.

 

Get the lowest version of Quickbooks and record all transactions. Makes it much easier at tax time. I wish all subcontractors would do this rather than receiving a shoe box to sort though.

 

Thanks for the info!

Okay that's what I was thinking for social security but wasn't exactly sure from google searching. That clears up a lot.

I know the rules about managing time what to do etc. that's something I learned when asking a contractor to do something.

After doing more research about the company idk exactly if it will be a 1099. I'll have to ask, basically the company employs "vendor" companies that employ me. It's in Seattle, and if your in the tech field you know what company and the v- specification.

In a situation like above would I be able to make an LLC? It doesn't seem like I could.

 

For writing things off

Mileage counts if where I primarily work is their office? I understood my mileage would only count if my say house is my primary work place and I travel to the place I am contracting?

I can count meals as well? Hmmm

I need to look more into this

 

Will you get a W2 or a 1099 from the vendor company?

 

So I just got off the phone and its a W2 so I assume I dont need to cover the other half of the social security benefits. Its just an 18 month contract at an hourly rate through a recruitment company.

 

Correct