0

I am a freelance web developer on a job search.

Is $65/hr W2 with NO BENEFITS basically the same as $65/hr 1099? Also, does W2 mean I'm an employee vs a contractor basically?

I used to figure 20% upcharge between 1099 and W2 WITH benefits, but now I'm at a loss with this "no benefits" thing. Any insight on this?

  • It may not be obvious to all (given the terms you mention) but consider adding location to your question. – DarkCygnus Sep 19 '17 at 21:29
  • @GrayCygnus I'm considering locations all over the US. But I'm hoping to work remote from FL. – WebDevGuy2 Sep 19 '17 at 23:03
3

A 1099 means you are an independent contractor and will pay your own taxes, generally through quarterly estimated payments. You are also then required to pay a self-employment tax, and make double the contributions to SS and Medicare. W2s means you are an employee, taxes are withheld, and the employer makes half of the SS and Medicare contributions. I believe you are also better covered in terms of workers comp insurance and so forth.

So I think the answer is that it is more complex from a tax perspective than what just a 20% upcharge would cover. Your risk as an independent contractor is also higher too, as your employer is less invested in keeping you on, if that is your longer term goal.

  • However its normal to charge a lot more per hour for a real self employed contractor ie 1099 to cover the additional costs normally 2x or 3x the employee / w2 rate – Neuromancer Sep 19 '17 at 21:46
  • #Neuromancer Wow that's alot! I heard roughly 20% from W2 with benefits to 1099 conversion. But, I like yours better. haha – WebDevGuy2 Sep 20 '17 at 1:46
  • @WebDevGuy2 - There are other costs associated with a W2 employee. Presumably you would have need somebody to do the payroll, vs just telling John Snow that he is the contracting officer, and giving him authority to pay the 1099 employee. Even if you are not paying somebody to do payroll, you are likely paying a service, in order to get it right and pay huge penalties. Since you are saving them that money, you get to charge them additional money, since that benefit of not having that expense, shouldn't be free. – Donald Sep 21 '17 at 18:34

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.