[consulting] Rate question

[Joe CodeWaggle]

The self employment tax is probably the main difference. When you work W2,
the employer (whoever is writing the check) is required to pay half of the
social security and Medicare taxes. On 1099, you wind up paying the full
amount yourself. Normally, for 1099 the rate is about 15% of your gross pay.
This year there is a temporary reduction in the rate, check irs.org or do a
search for "self-employment tax".

 

So, the employer normally pays 7.5% of your rate directly to the IRS. You
need to increase your rate by more than 7.5% to cover that. Add in the time
spent doing extra paperwork and I'd suggest at least a 10% increase in your
rate. You'll be responsible to make quarterly tax payments to the IRS for
any 1099 income you receive.

 

This assumes you normally do contract work and don't receive any benefits.
If you're switching from employment as a benefits receiving full time
employee, you'll need to determine what those benefits (health insurance,
paid vacation, etc.) will cost you to replace and add that into the rate you
charge.

 

Joe

 

From: consulting-bounces at drupal.org [mailto:consulting-bounces at drupal.org]
On Behalf Of nan wich
Sent: Tuesday, March 29, 2011 12:17 AM
To: A list for Drupal consultants and Drupal service/hosting providers
Subject: [consulting] Rate question

 

I usuually work on a W2 because I hate taxes. Every once in a while, a
recruiter won't offer W2. How much differential should I allow in my rates
to go to 1099? Personally, the paperwork hassle is worth 100%. I know the
typical company claims about 40% burdening, but that includes office space.
 

Nancy

Injustice anywhere is a threat to justice everywhere. -- Dr. Martin L. King,
Jr.

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