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Contractor vs Employee
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So, you have a job offer and the employer offers you employment as either an independent contractor or an employee. You figure that since your wife is in the military, you don't need the insurance and your paycheck will be bigger without all that withholding taken out.
Life as a 1099'er
Ready to take that 1099? Not so fast. You might be in for a big shock at the end of the year. Here is a list of some of the hits you'll take.
• All the income taxes for each taxing entity will be due every quarter after your first year in business. A total of 90 percent must be paid by April 15 of the following year or there will be a penalty.
• You will have to pay the entire Social Security tax. That amounts to 15.3 percent on your first $113,700 and 2.9 percent over that amount. Employees get half that amount paid by their employer automatically. However, as a self-employed individual, you may deduct the half that an employer would have contributed.
• Independent contractors are not covered by non-discrimination laws, wage and hour protection, unemployment insurance, or pension and benefit protections that “real” employees receive.
• If you drive or run other equipment for the business that pays you, you won't be covered by the employer's insurance policy. Guess who that leaves?
What Makes an Employee
The basic issue in deciding whether a person is an employee or an independent contractor is the business's control over the work of the person. This sounds like a simple matter, but courts constantly are deluged with arguments about this issue.
If you're told when to come to work; if you don't provide your own equipment or supplies; and if you are paid in set increments such as hours or piecework, you are an employee, period. If they train you, you are an employee. The courts have made clear that just because the employer doesn't decide to use control, doesn't mean you are then an independent contractor. The crux of the matter is whether they have the right to do so. Read the IRS publication about the issue of contractors vs employees.
Making the Right Decision
Before you make any decisions, take some time to investigate and consider which category works best for you and your family. If you are leaning toward becoming an independent contractor, make sure you're prepared to save enough to cover your tax expenses and any additional costs like liability insurance.
Consider incorporating as a LLC to protect yourself and give you additional tax protection. It's a good idea to get the help of a paralegal, lawyer and tax specialist.
If you are considering becoming self-employed, be certain to read the IRS Bulletin Understanding Employment Taxes. This is a simple document that explains what the requirements are in everyday language.
This post was sponsored by the School of Firearms Technology from the Sonoran Desert Institute.
Happy Male Military Spouse Appreciation Day!
This post is specifically for those guys interested in winning a scholarship from the Sonoran Desert Institute's Schoool of Firearms Technology. Â The only way you can be eligible for this amazing opportunity is if you are a member of the MachoSpouse.com community AND if you register your name and email below. Â THE ONLY NAME WE CHOSE WILL BE FROM THIS EMAIL LIST.
There are a lot of male military spouses who have different interests, hobbies, careers, and life situations, so we don't want to award this scholarship to someone not interested. Â That would suck for all the guys who really want this.
If you're not interested, hey, we will still have a few give-a-ways throughout the day on May 7th.
A very special "thank you" to our sponsor, the Sonoran Desert Institute's School of Firearms Technology. Â Most of this was their idea, so visit their Facebook page/website and let them know how much we appreciate their support.
GOOD LUCK GUYS!
Enter to Win the SDI Scholarship!
I recently came across an article that really made me stop and think "Could this really happen?" then it became "Oh Wait... They are talking about a Family like mine."
The Article I am talking about is a post from MrDad.com answering a a Veterns question "My husband and I both have disabilities. He is blind and I suffer from a traumatic brain injury I received serving in Iraq. I'm pregnant and we're due in about a month. We were both so excited, but a friend told us that there's a chance we could lose custody of the baby because we both have disabilities. Now, instead of looking forward to becoming parents, we're both in a panic. Is that true? If so, what can we do?"