W2 vs 1099

[moto_za]

Anyone have a good resource on how to decide whether to go 1099 vs W2? I have read quite a but about on WCI and other sites but still found myself a bit confused. If pay is the same, does it make most sense to go W2 as the employer would be paying for social security and would have less tax obligations? I am currently all 1099 with my jobs and wondering if I am screwing myself by not picking a W2 contract instead. I mostly work as needed at a few different sites.

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[BiscoDisco]

I work at a few different sites as well and go 1099. I pay myself a reasonable salary and then take the rest as a distribution. I also write off things like my car, office, etc. I also am able to tax defer much more money than I could as a W2. This is in addition to paying my child income which is just below the level in which they would be taxed, so that's more income in the family untaxed which I then use to fund their college savings. For me, it makes sense, but my income is pretty high (>600k). If I made closer to 300k I don't think it would make sense.

 

[clausewitz2]

Anyone have a good resource on how to decide whether to go 1099 vs W2? I have read quite a but about on WCI and other sites but still found myself a bit confused. If pay is the same, does it make most sense to go W2 as the employer would be paying for social security and would have less tax obligations? I am currently all 1099 with my jobs and wondering if I am screwing myself by not picking a W2 contract instead. I mostly work as needed at a few different sites.

I think you are going to be hard-pressed to find an employer who will offer you literally the same amount of money for W2 and 1099 for a given position. It would make zero sense for them financially, one is significantly more expensive for them than the other.

 

[TexasPhysician]

W2 is better if you need health insurance or don’t understand how to get a good accountant to set up deductions.

1099 always pays less in taxes which means more money to you if you set it up right. It does take effort. If done right and you are willing to save a bunch for retirement, the amount lost in taxes can be significantly less.

 

[Merovinge]

Best case scenario is w2 the main job if you need benefits (healthcare is easily 5 figures of benefit, particularly if you have a family), CME funds, and get the 401k match. Then 1099 any other work to use your own deductions and fund the rest of your 401k

 

[moto_za]

I work at a few different sites as well and go 1099. I pay myself a reasonable salary and then take the rest as a distribution. I also write off things like my car, office, etc. I also am able to tax defer much more money than I could as a W2. This is in addition to paying my child income which is just below the level in which they would be taxed, so that's more income in the family untaxed which I then use to fund their college savings. For me, it makes sense, but my income is pretty high (>600k). If I made closer to 300k I don't think it would make sense.

Thanks for the response. Do you have a S corp set up for this?

 

[moto_za]

I think you are going to be hard-pressed to find an employer who will offer you literally the same amount of money for W2 and 1099 for a given position. It would make zero sense for them financially, one is significantly more expensive for them than the other.

Actually that is why I am confused, because two of my positions offered me the same pay as either w2 or 1099

 

[BiscoDisco]

Thanks for the response. Do you have a S corp set up for this?

I do

 

[WisNeuro]

Best case scenario is w2 the main job if you need benefits (healthcare is easily 5 figures of benefit, particularly if you have a family), CME funds, and get the 401k match. Then 1099 any other work to use your own deductions and fund the rest of your 401k

Most of the time, yes, but not always. I have seen one contract offer with a higher salary, but with a healthcare option where the employer portion paid was pretty small and all of the healthplan options were worse, and employee paid more, than similar plane on the marketplace. One of the reasons I advise trainees and mentees to monetize everything in salary and benefits when comparing jobs.