Wage advice

I got called by a recruiter for a desktop support position today. I think I fit the position very well and when asked what salary i was looking for. I asked for 16/hour. It is 16/hour on 1099. how is this different than 16/hour on 1040(most common)? am i screwing myself?

here is the summary of the job

Position: Desktop Support
Location: NYC
Duration: 1 year +Extendable
Client: Celgene
PROJECT SCOPE/TASKS:
• Be available to work non-standard hours (i.e., early mornings, week-ends, etc.)
• Set up new users (may require work station relocation)
• Connect work stations to LAN
• Image PCs and laptops
• Install hardware and software products
• Install upgrades
• Support desktop, laptop, PC, and handheld device hardware
• Provide desktop, laptop, and handheld operating system support
• Provide application support
• Provide excellent customer service
• Establish and maintain cooperative working relationships with others
• Communicate effectively both verbally and in writing.

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Comments

rogue2shadow

I believe 1099 makes you "truly" a freelancer:

Wisegeek.com wrote:

On a 1099 MISC Form, the income earned will be noted, but there will not be any deductions for federal and state income taxes, nor will any deferred compensation, social security, or medical deductions be taken. Since the 1099 recipient is not an employee of the business, the business is obligated only to tender the income to the contractor sans any deductions. This 1099 income is also reported to the Internal Revenue Service so it has the opportunity to track income from freelance workers. The freelancer will be obligated to make his or her own tax deductions and forward such payments to the IRS.

Essentially, you take care of the taxes that would be owed to the IRS and you get paid the full $16/hr without the normal automatic deductions that occur with employers that give 1040s.

I'm in no way a finance guy but I hope this helps!

willhi1979

On the 1099, you'd also have to pay the company's percentage of your Social Security tax too, but on the 1040, they would pay for it.

Forsaken_GA

You're also not really going to save any money by going on 1099. You'll have to pay Self-Employment tax, file a Schedule C, etc. I'm not sure whether or not you're supposed to pay estimated taxes.

The hardest thing for most 1099 folks I know is actually putting the money away, and then getting hit with a huge bill come tax time. Do not screw with the IRS, those people will make your life hell.

willhi1979

Forsaken_GA wrote: »

You're also not really going to save any money by going on 1099. You'll have to pay Self-Employment tax, file a Schedule C, etc. I'm not sure whether or not you're supposed to pay estimated taxes.

I remember that you're supposed to pay estimated taxes each quarter, but who knows if that happens.

Sounds Good

im not choosing 1099 out of my on choice. the recruiter basically said this is the method of which we are paying you.

rogue2shadow

Sounds Good wrote: »

im not choosing 1099 out of my on choice. the recruiter basically said this is the method of which we are paying you.

Personally, I'd back out. Like Forsaken said, the IRS is no joke lol.

Priston

For NYC with A+ Net+ and Sec+ I'd say you could have gotten 17-18 / hour on a 1099.

If a recruiter ever asked me how much I wanted to make I would give them a range and tell them it depends on the work/company benefits.

joshmadakor

Sounds like the trouble is more than its worth. I wouldn't want to deal with this. I had a similar thing happen to me, but I didn't notice it was happening and I ended up having to pay the IRS. I was pissed.

Forsaken_GA

rogue2shadow wrote: »

Personally, I'd back out. Like Forsaken said, the IRS is no joke lol.

If the pay is good, and the work is something he'd enjoy doing, then I wouldn't back away from the contract. 1099 work isn't horrible.

It just requires alot more dilligence on the part of the contractor. I've done alot of 1099 work, but most of them were short one shot deals, which is why I never did estimated taxes... I couldn't really estimate when or where the work would come since it was a side thing.

As long as you keep your tax papers straight, and, as a general rule, put aside 25% of your pay (more, if you have a state income tax) to pay your taxes, you'll be fine. You'll also want to keep track of your expenses so you can include them in your Schedule C, and thereby reduce your tax liability.

Contracting can be worth it, but it puts a whole lot of responsibility on the contractor, and if you're not ready for that part, then pass on it.

Personally, $16/hr would not be worth the hassle for me, not unless I had health care coverage from some other source. Most benefits like 401k I can live without, as I can replace that with things like a Roth IRA, but health care is one of those things that's absolutely mandatory for me, and health care options are incredibly simplified by being able to join an employers group plan

VAHokie56

Before I was in IT I was a real estate agent. I hope I never have to work on a 1099 again...paying the government at the end of the year SUUUUCKS. I would certainly look for something else, good luck

Sounds Good

VAHokie56 wrote: »

Before I was in IT I was a real estate agent. I hope I never have to work on a 1099 again...paying the government at the end of the year SUUUUCKS. I would certainly look for something else, good luck

is the amount any different than having to pay the government through each paycheck? if it is the same amount, it is just a matter of saving up about 40% of each paycheck and knowing you'll lose it come tax season.

VAHokie56

Honestly I don't recall the exact numbers but I imagine its ballpark. Like forsaken said I set aside 25% of each commission check I got and that is really hard to do and not spend it.

TheSuperRuski

VAHokie56 wrote: »

Honestly I don't recall the exact numbers but I imagine its ballpark. Like forsaken said I set aside 25% of each commission check I got and that is really hard to do and not spend it.

I put aside 30%. Dam NYC taxes. I don't know if that will be enough but i have been good at not touching that money. If you do take the gig, KEEP TRACK OF YOUR RECEIPTS. At the end of the year you can use them to write a lot of your expenses off. If you think hard enough, some of the things you pay for now can be transferred to company expenses and be written off. I have friends that do a little bit of freelance work just to get write-offs. Its not a bad deal but i wouldn't freelance for 16/hr. I think you should re-negotiate the terms with the arguement that a lot of your expenses are out of your pocket since they do not want to put you on payroll.

Sounds Good

TheSuperRuski wrote: »

I put aside 30%. Dam NYC taxes. I don't know if that will be enough but i have been good at not touching that money. If you do take the gig, KEEP TRACK OF YOUR RECEIPTS. At the end of the year you can use them to write a lot of your expenses off. If you think hard enough, some of the things you pay for now can be transferred to company expenses and be written off. I have friends that do a little bit of freelance work just to get write-offs. Its not a bad deal but i wouldn't freelance for 16/hr. I think you should re-negotiate the terms with the arguement that a lot of your expenses are out of your pocket since they do not want to put you on payroll.

this may be a stretch, but can you write off purchasing a car for "work" purposes?

and im no longer considering this position unless i can renegotiate to at least 20/hour.

thanks for the insight guys

TheSuperRuski

Sounds Good wrote: »

this may be a stretch, but can you write off purchasing a car for "work" purposes?

and im no longer considering this position unless i can renegotiate to at least 20/hour.

thanks for the insight guys

I`m sure a purchased vehicle can be written off. I read on the IRS website that the place where a lot of self employed type people get in trouble is when they start writing off expenses that aren`t strictly business related. Example would be a cell phone. I use it for all of my business calls but also my personal calls. If i wanted to write off my bill, i would have to get a separate line or go through all of my yearly bills and split which calls were business and which calls were personal and then divide the calls and something else mathematical lol. That's pretty much a hassle in itself.

For your scenario, if you used it strictly for business(No personal use) you could, but that's not likely unless its a commercial vehicle or it isn't your primary vehicle. Even if it was, the IRS would probably audit you.

To answer your question, Yes you could write off but read that last paragraph. If i was you, I wouldn't but i would just keep track of all the expenses i incur while owning it related to business use. Gas, insurance, tolls, mileage, maintenance, etc...(Dont write off the road trip mileage but from the time you leave on a call to the time you return home is gravy)

erpadmin

Sounds Good wrote: »

this may be a stretch, but can you write off purchasing a car for "work" purposes?

Ummm....yes, you can.

You're the finance major...ask some of your accounting buddies.

Sounds Good

erpadmin wrote: »

Ummm....yes, you can.

You're the finance major...ask some of your accounting buddies.

yea, i know some people. but its not entirely for "work" purposes if you catch my drift.

eMeS

Sounds Good wrote: »

this may be a stretch, but can you write off purchasing a car for "work" purposes?

Yes, and if you can afford to this is a good time to purchase a vehicle or other expensive equipment, as the new tax law that was passed allows for immediate depreciation for qualifying expenditures.

You might also want to look somewhere other than an certification forum for tax/business planning advice.

MS

rwmidl

eMeS wrote: »

Yes, and if you can afford to this is a good time to purchase a vehicle or other expensive equipment, as the new tax law that was passed allows for immediate depreciation for qualifying expenditures.

You might also want to look somewhere other than an certification forum for tax/business planning advice.

MS

+1 on the above! For tax/business planning advice, consult a good accountant and/or attorney, not the interwebz.

Sounds Good

well im not buying it anytime soon. in about 2-3 years when i have the money, i'll buy an Audi A4 black/black fully equiped. =]

TheSuperRuski

Sounds Good wrote: »

well im not buying it anytime soon. in about 2-3 years when i have the money, i'll buy an Audi A4 black/black fully equiped. =]

Nice lol... I used to work on Audi/Volkswagen back in the day(like 3 - 4 years ago) A4's are pretty nice,Get a 1.8T(super easy to work on) unless its a newer version which i believe is 2.0T.Personally I'd love an S8(Watch the movie Ronin with Deniro or any of the Transporter movies) but my Jeep Cherokee does fine for now, especially with the snow.

erpadmin

TheSuperRuski wrote: »

Nice lol... I used to work on Audi/Volkswagen back in the day(like 3 - 4 years ago) A4's are pretty nice,Get a 1.8T(super easy to work on) unless its a newer version which i believe is 2.0T.Personally I'd love an S8(Watch the movie Ronin with Deniro or any of the Transporter movies) but my Jeep Cherokee does fine for now, especially with the snow.

My friend just got the A5...if you want an A5 you have to wait like 3-6 months, at minimum, just to touch one. LOL. It is a sweet ride compared to the A4 and the fact that it's not as common as the A4 or A6, it's even that much hotter.

After the crap I just went through with shovelling...if I'm getting an Audi (and chances are good I'm not), I'd go with the Q5.

TheSuperRuski

erpadmin wrote: »

My friend just got the A5...if you want an A5 you have to wait like 3-6 months, at minimum, just to touch one. LOL. It is a sweet ride compared to the A4 and the fact that it's not as common as the A4 or A6, it's even that much hotter.

After the crap I just went through with shovelling...if I'm getting an Audi (and chances are good I'm not), I'd go with the Q5.

Yea, I'd keep a truck for the winter but the S8 is my fantasy car. More realistically, i would be driving an Evo or a Galant VR4. Cant get away from awd lol.

N2IT

VAHokie56 wrote: »

Before I was in IT I was a real estate agent. I hope I never have to work on a 1099 again...paying the government at the end of the year SUUUUCKS. I would certainly look for something else, good luck

+1

I was a real estate sales man for a while and you are absolutely correct sir!

powerfool

It requires a lot of discipline, but getting paid as a contractor (w/ a 1099 tax form) can be very beneficial. First of all, you will have to pay "self-employment" taxes, like others have said, which essentially means you double your FICA taxes (social security and medicare)... makes that about 15.3% instead of 7.65%, or whatever it is. But also, you don't get paid for sick or vacation time, nor are you going to be getting any portion of health insurance premiums covered or any other perk you might hope to get. Honestly, it is not uncommon to go for an amount about 50% more than you would as a W-2 employee. Just take your salary at $16/hr... $16 * 2080 = $33,280. Now, if you consider two weeks of vacation and five sick days, that is 120 hours right off of the top. Also, people that work freelance on longer contracts need job search time, roughly two weeks for every change. Since this is a one year contract (w/ chance for extension), you could add another two weeks of time, or another 80 hours... you are now up to 200 hours. They also will not pay you for any training time nor materials, etc. So, if you would normally look to invest a week of your time per year for training, throw in another 40 hours. So, 240 hours, at a conservative estimate. So, here is how you find your hourly rate from that: $33,280 / (2080 - 240) = $18.09/hour. Then, multiply by 1.0765 for additional self-employment tax: $18.09 * 1.0765 = $19.47... just round up... $19.50/hour. The key here is going to be that you are going to want to set aside money from every check into various "accounts" (in a strictly accounting term... probably want to have one separate account for this with the best savings rate you can get). One account for each of the following: taxes (can break this down into type), time off (can break this down into vacation, sick, training, and job search). And that doesn't include the other benefits. If you want your wages to cover your expenses, add an estimated annual cost for those and divide by 1840 (which is 2080 - 240) and tack it on to your $19.50.

Now, writing off expenses is the BIG perk here. Normally, as a W-2 employee, you can only write off whatever EXCEEDS 2% of your AGI (adjusted gross income). As a 1099, you write off all of it. Now there are rules for how everything works and the formalities you are supposed to go through; I will not go through those... that is up to you to find an accountant or tax attorney to give you the necessary comfort level. However, anything that is a business expense can be written off. Since you are a 1099, you should maintain a home office for doing your billing and accounting. You can write off utilities associated with this space as a percentage of your square footage. And since you maintain an office at home, you could potentially write off the mileage from home to your client's location each day; you are not supposed to do this unless you are travelling after your first stop of the day... but this could be your home with your own office... something to work out with a professional. You also write off the professional services you receive from this accountant or attorney. The list can grow... cell phone, internet, relevant technology expenses. Everything you write off drastically improves your tax situation as you don't pay FICA taxes on this either.

Anyhow, this can get extremely complex. It can also work out great if you have the discipline necessary (less discipline is required if you can automate your processes). Feel free to PM if you have additional questions.

rob7278

My 2 cents is- this would be well below what the industry average/ going rate for my area would be paying. Also you have to consider- most employers that are cheapskate's from the start are going to always be cheapskates, so assuming you could ever get offered a permanent position- that permanent position would also probably pay below industry scale.
However if you feel like this company will really help you build your resume and in the long run help you get a much better paying job, then the end could justify the means.

ibcritn

rob7278 wrote: »

Also you have to consider- most employers that are cheapskate's from the start are going to always be cheapskates

I have found this to be true as well.