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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 6167
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I have two job offers that I'm weighing and need to know

Customer Question

I have two job offers that I'm weighing and need to know which offer is better due to tax implications as an independent contractor.
1. Job A - Pays $32/hour as an independent contractor. It does not include vacation or health insurance. Assuming I work 40-50 hours a week and take 10 days off, I figure that I'd make about $72,500 per year before taxes. I would also pay my own health insurance (about $3,600 per year?). Possible deductions include approximately 3,200 miles driven per year, and maybe a few hundred dollars for cell phone use, clothes, and other minor expenses.
2. Job B is a salary position that pays $58,000 per year and includes up to $300 per month of health insurance ($3,600) and 15 days of paid vacation (I figure that's worth about $3,300).
Thank you,
Cory
Submitted: 8 months ago.
Category: Tax
Expert:  Stephen G. replied 8 months ago.

The options are designed to come out about the same.

I would definitely take the salary option.

One factor which doesn't rise to the surface that obviously is that as an independent contractor there's no guarantee as to the number of hours that you will be paid for. So if that slips a little, then you could easily be worse off.

You also have to deal with your own Social Security & Medicare taxes as an Independent Contractor by filing the self-employment tax form SE with your annual income tax return. That will work out to approximately 12.4%, net, after figuring the deductions related to the self-employment tax you will pay. As an employee the Company will pay 7.65% of your SS & Medicare tax as part of your compensation. You will also be covered by Workman's Compensation Insurance and Unemployment Insurance, both of which you can not be covered by as an Independent Contractor.

As an independent contractor you will have to make estimated tax payments vs. having your tax withheld from your compensation as an employee.

I'll be happy to answer any follow-up questions that you may have.

Customer: replied 8 months ago.
Stephen, Thank you so much for your quick and detailed response. Would it be be possible to provide a quick calculation as to my take home pay for both jobs after considering taxes (and deductions) , insurance, and vacation? This would assume I am able to work 45 hrs per week for the independent contracting job. Thanks
Expert:  Stephen G. replied 8 months ago.

Unfortunately that isn't as simple as it sounds and would really entail more information than is readily available. There's no such thing as a "quick calculation" for what you are asking.

Expert:  Stephen G. replied 8 months ago.

I answered your question and there's not enough information to answer your follow-up question which is much more involved that you evidently can appreciate.

I would appreciate it if you would provide a rating for my answer to your initial questions which you indicated you were satisfied with my response. If you would like your second question to be dealt with, please let me know & if you start another question, I'll give you a list of the additional information required to make those computations.

Thanks very much,

Steve G.

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