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   >> Horn Depot

  Rate thread Print Thread
getBent()
500+ posts
02/12/08 08:34 AM
W-2 vs. 1099 Hourly Rates

I'm thinking about doing some work on a straight contract. What is an appropriate pay rate increase for 1099 work vs. being a W-2 employee?

For example, if I was making $50/hour as a W-2 employee should I be asking for $60/hour as a 1099? $70?

I know I'll be hit with another 7.5% in self-employment taxes, but what's appropriate for the other added expenses (bookkeeping, billing, etc.)




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mishatx
2500+ posts
02/12/08 09:41 AM
Re: W-2 vs. 1099 Hourly Rates [re: getBent()]

In reply to:

I know I'll be hit with another 7.5% in self-employment taxes, but what's appropriate for the other added expenses (bookkeeping, billing, etc.)




It's more than 7.5% - the number at the bottom of schedule SE is 15.3% of the amount up to $97,500 (and 2.5% of any amount above that), and although half that is deductible from your regular income, it's still an effective rate of 10-12% most of the time.

You also need to consider that as a W-2 you probably got benefits - leave, insurance, etc that you won't get as a 1099. I'd think a $50/hr w-2 should need $75 as a 1099, and I remember seeing one rule-of-thumb somewhere that it should be as high as $100 (partly because as a W-2, if the work runs dry temporarily they'll find something for you to do and pay you, as a 1099 they'll send you home till more work comes in)






Check mii out
4546-0941-0561

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getBent()
500+ posts
02/12/08 07:07 PM
Re: W-2 vs. 1099 Hourly Rates [re: getBent()]

Thanks for the response mishatx. This is new area for me and I thought I was erring on the safe side with a 20% increase - just goes to show how new I am. I'm not sure if I'll be able to get another 50% on top of my normal rate, but it's good to know that's a realistic number.

Thanks again.




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CO Horn
250+ posts
02/12/08 11:49 PM
Re: W-2 vs. 1099 Hourly Rates [re: getBent()]

As a W-2 employee you pay 7.65% for social security taxes. As a 1099 contractor you pay both the employee and the employer portion, so it doubles to 15.3%.

We pay contractors 40-50% more than a W-2 employee, so if you would make $50/hr as an employee, I would ask for $70-$75 minimum as a contractor.

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BA93
5000+ posts
02/13/08 02:52 PM
Re: W-2 vs. 1099 Hourly Rates [re: CO Horn]

Also think about how much time you will be working or not. People who employ contractors sometimes conveniently forgot that contractors don't get 10 paid holidays or a few weeks paid vacation. And sick days? of course not.

But if they are expecting you to work 50 hour weeks than you might be coming out way ahead.

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