dsatish said:
W2 is always better because the employer will take care of paying the social security taxes. With 1099 you have to pay the social security tax(and medicare) of 15% every month.
If you are on 1099, rule #1 (and there are lots of rules) is to ensure that the employer pays you at least 7.5% more gross. 6.2% will cover the FICA, and 1% will cover your hassles in terms of quarterly tax payments and the like.
So you need to have a personal accountant.
An excellent idea. Any relationship with an accountant should be like your relationship with an attorney: you are
not paying him or her to fill out forms - you can do that. You're paying for advice and suggestions.
Also for buying a house, you need W2 or salaried employment (with 1099 you need atleast 2 years prior 1099 record to get mortgage approval).
That's less true nowadays, due to larger numbers of self-employed individuals. You might get dinged with a quarter or half point extra interest, but as long as you can document a substantial, regular income you should be OK, even if you need to hunt around a bit.
Still some people prefer 1099 because they think that they can show lot of tax deductions, thou i am not sure how effective that will be.
Very. On Schedule C you can deduct all kinds of goodies for business. Most prominent are your car for business (my family has three cars so I can easily claim 100% of one car for business) and your health insurance, and any other miscellaneous things that would never be deducted as an individual since they are subject to the 2% threshold.
Then you deduct 100% of your health insurance premiums. For most folks, that's a $4000 to $9000 per year deduction - approaching the same size as mortgage interest on a $150,000 mortgage.
Now that you've deducted all that on Schedule C, we go through all of the fun personal stuff like state/local taxes, mortgage interest, HSA deductibles, etc. etc.
Going from W-2 to 1099 is rarely "better" or "worse" in general after the GC. The details make the difference. What's helpful is to figure out all of your numbers in advance and negotiate a 1099 rate 5% or more above that and you'll come out ahead. Negotiating before you know all of your costs is a recepie for disaster.
