1099 or W2 After GC approval

C

chmurali

Registered Users (C)
Hi Gurus,
Recently I have received my 485 application approved and I also have my plastic card.
My questions are
1. I am getting offers from several companies where they are saying that they will pay me in 1099 rather than W2. Can Some body tell me the difference between the two and which is beneficial for an independent contractor.

2. If I am getting paid through 1099 should I take care of my own medical insurance? If so are there any companies which offer insurance for independent contractors who are not attached to any company?

3. That company person offering me position is saying that let us say hourly rate agreed was 40 dollars then he is willing to pay 25 dollars as salary and remaining 15 dollars as per dim? What is this perdim? He is saying that you need n't pay taxes on perdim because it is like a daily allowance. Please share your experiences.

Thanks,
 
Originally posted by chmurali
Hi Gurus,
Recently I have received my 485 application approved and I also have my plastic card.
My questions are
1. I am getting offers from several companies where they are saying that they will pay me in 1099 rather than W2. Can Some body tell me the difference between the two and which is beneficial for an independent contractor.
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The difference between the 2 is who does your tax withholding. In 1099, you are supposed to file estimated tax every 3 months and that is your tax with-holding. You are also responsible for paying the employer's part of Social Security tax (6.5%) on 1099. Not sure about unemployment (You wither dont get any or you have to pay for that). In 1099, you have to file a schedule C with the 1040. You can deduct the cost of doing business (e.g. mileage/gas for the drive to work). W2 is when the employer is withholding your taxes. He pays for Social Security. You can't deduct cost of business.
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2. If I am getting paid through 1099 should I take care of my own medical insurance? If so are there any companies which offer insurance for independent contractors who are not attached to any company?
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You have to take care of medical insurance in either case. In case of W2, you need to have a set number of hours before you can enroll in the group medical insurance by the employer. Almost all the big companies have insuance for family/independent contractor. Contact an insurance broker and he can get you a good rate.
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3. That company person offering me position is saying that let us say hourly rate agreed was 40 dollars then he is willing to pay 25 dollars as salary and remaining 15 dollars as per dim? What is this perdim? He is saying that you need n't pay taxes on perdim because it is like a daily allowance. Please share your experiences.
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You dont have to pay taxes on per diem, however you have to maintain receipts for all expenses above $25. At $15/day, you daily perdiem rate becomes $120.00. (Assuming 8 hour workday). You have to show expenses for that. Also, you cannot show mileage/ hotel in you home city and a lot of stuff as expenses. This is full of pitfalls. You have to explain the perdiem (in case you get audited) and the IRS would love to know why you are getting a perdiem of $120.00 , whereas the industry standard is $25-$35 plus actual expenses.
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Thanks,
Click to expand...
 
Share my experience

Hi Ma21 & JoeF,
Thanks for sharing your experience.
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This is full of pitfalls. You have to explain the perdiem (in case you get audited) and the IRS would love to know why you are getting a perdiem of $120.00 , whereas the industry standard is $25-$35 plus actual expenses.
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When you say this is it 25-35 dollars per day or per month?
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Here is some additional info that I wanted to share.
I also spoke with my tax consultant and he is saying that when you are taking money on 1099 then I will have to pay 7% more taxes like for Social Security and other expenses that company pays to IRS when they are paying on W2.
But the advantages are if you are getting 40 dollars then you can deduct certain expenses like fuel to work, High speed internet, car loan etc., (let us say come to 5 dollar per hour) then your actual income earned is only 35 dollars and you will pay tax on only 35 dollars.
But disadvantages are
1. No group medical insurance so while I enquired with a medical insurance agent the expenses to my family were running close to 1000 dollars instead of 400 dollars.
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How does Perdim work?
Do I have to work on w2 so that I can get perdim from company or can I claim constant amount of perdim while I am getting paid through 1099?

Thanks in advance.:cool:
 
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