Tax

Have a tax question? Ask a tax Expert

Connect one-on-one with {0} who will answer your question

I recently was offered a one-year position working

Customer Question

Hello- I recently was...

Hello- I recently was offered a one-year position working on a government project. I was recruited for this position by a staffing company. I have been going through the paperwork and was surprised to see that the staffing company sent me a W-4 instead of a 1099. My question is twofold:
1. The first part is whether I should accept payment through the W-4 (W-2) as an employee of the staffing company, or if I should ask to receive payment through my company as a 1099 contractor. My goal is to maximize my take home pay and minimize taxes. Here are the details:
-I own my own company and have hired a manager to continue running day to day operations over the next year while I am doing this project. My company is on track to gross around $350,000 this year, my salary will probably be around 59k.
-The Salary I have been offered by staffing company for the gov. position is $120.21 per hour ($250,036.80 annually)
-The position includes a health and welfare benefit of $4.02 per hour (approx. $8000/ year).
My thoughts are that as a W2 the staffing company will pay their half of the employer tax and will also withhold taxes from my paycheck. This is easier for me BUT I will be taxed on the entire $250,000 salary. However, because I am still running my business, I could deduct the expenses from my business taxes to balance things out. I am taking the job to expand my business into the federal sector so I am assuming this means I can deduct for travel etc. even if I am a W-4 on their side. Also, I plan on putting a portion of the salary into 509 college fund for both my kids, and also was thinking about sheltering some money in a life insurance policy (whole life, small policy, separate from the term policy that would actually cover expenses if I died). This is in addition to 401k etc.
On the other hand, As a 1099 I can deduct like a crazy person and decrease my salary to around 50- 70k, putting the rest into my business. Whatever else I take out can be taken as dividends through my company at 15%. But, if I do this then I have to pay both Employer and Employee side of the taxes. And I don't know what happens to the health and welfare benefit if I ask for a 1099. This brings me to question # *****
2. Per staffing company paperwork: "A nominal portion of the H&W benefit is applied toward mandatory short-term/long-term disability and life insurance. A portion of the remainder can be applied to health insurance, cashed out or applied to a 401K program."
My question is what is the smartest thing to do with this benefit money? I think the 401k is matched but am not positive. I really need advice on the best way to manage this money and maximize its potential.
GOAL: to make the SMARTEST most financially savvy choices available to maximize profit, minimize tax spending, maximize money that is matched by employer or sheltered in tax free account, maximize kid and retirement funds, and basically maneuver things like a millionaire.
Let me know if more information is needed.
Looking forward to your thoughts.

Submitted: 7 years ago.Category: Tax

Show Less

Ask Your Own Tax Question

Answered in 4 minutes by:

7/27/2015

Tax Professional: PDtax, Certified Public Accountant (CPA) replied 7 years ago

PDtax, Certified Public Accountant (CPA)

Category: Tax

Satisfied Customers: 8,278

Experience: 40 years tax experience, including four years at a Big 4 firm.

Verified

Hi from just answer. I'm PDtax, and can assist. The payroll taxes and health care make a w2 better. Simple as that. The employer will also pay workers comp and other fringes. Unless you are comparing 130,000 in 1099 to your company with 100,000 in wages, it's a no brainer.

Customer reply replied 7 years ago

Did you read the whole question and all the details I included? Your answer seems like you just read the first section. I get benefits either way. I am not going to rewrite everything I already wrote again so just let me know if you actually read Q or if you just responded to the first paragraph..

Tax Professional: PDtax, Certified Public Accountant (CPA) replied 7 years ago

The second component, how to invest, is more involved.
You have the opportunity to open deferred comp and put serious money away.
This is a one year engagement, so taking it and saving all you can likely starts retirement, college and other savings.
The best way to do ask of this is a with and without analysis. I can assist, but i would need to ask for a price increase. I also need more facts, such as the salary you have to pay the, manager for one year.
Accept my offer, and I'll work this y through.
PDtax

Customer reply replied 7 years ago

I just want to make sure I understand you correctly. You are saying it is a "no brainer" - I should choose to get taxed on $250+k versus pay employment tax myself on $60k? If I take the W2 can I deduct from my business the expenses I would otherwise deduct from the 250 salary if it were a 1099? How much can I put away in retirement and pre-tax accounts if I take the w-2? I am happy to pay additional amount to get a solid answer.Not $250 though. I will pay $100 (in addition to the $39 I already paid) for 30 additional min. This is $60 for you for total of 45 min. of work. Not too bad.. Or if you want I will pay through p a 7 p a l directly if you send me ur email - will pay $1 here to continue and $74 thru pp ... it is up to you.

Tax Professional: PDtax, Certified Public Accountant (CPA) replied 7 years ago

I will opt out.The complexity of the analysis and what you want to do suggests a lot more than your initial requested issues. My price was discounted to allow for more time. Other experts can review and assist.

Customer reply replied 7 years ago

Fair enough. Thanks

Tax Professional: Lev, Tax Advisor replied 7 years ago

Lev, Tax Advisor

Category: Tax

Satisfied Customers: 63,556

Experience: Taxes, Immigration, Labor Relations

Verified

Please allow me to assist...Indeed - self-employment taxes are equivalent of employment taxes (Social Security and Medicare) with the only difference that self-employed person pays the full amount - but an employee pays only a half and another half is paid by the employer.As an employee - you do not see the part paid by your employer and that amount is not included into your taxable income - similar a self-employed person excluded from taxable income one half of the self employment tax - that is an equivalent to the amount paid by the employer so the tax treatment is very similar.The ONLY difference is with deduction of business expenses.Self-employed people deduct business expenses directly against gross business income - and net business income is used to calculate both - income tax and self-employment tax.Employees however may deduct employee business expenses but ONLY if itemize and only whatever is above 2% of the AGI. In additional that deduction will affect ONLY income tax - but not employment taxes that already withheld from wages.So if you have substantial deductible expenses - it is preferable to be self-employed - assuming other circumstances are similar. But if there is no much deductions - it would be more beneficial to be an employee. The self-employed person deducts all qualified business expenses without 2% limit - and only NET self-employment income will be subject of both - income and self-employment taxes.So - if you have substantial deductions - it would be more advantageous to be paid via 1099MISC.3.There are some benefits available for employees - depending on your situation - there might be subsidized health insurance, paid vacation and holidays, paid sick days, various fringe benefits (educational assistance, life insurance, etc), retirement plan, stock options, etc.When compare employee vs self-employment options - we need to evaluate these benefits.Let me know if you need any help this matter.So - what we need to weigh - (1) additional benefits as an employee - actual cost and how these benefits are important to you (2) expected business deduction - total amount and the amount of misc deduction subject to 2% you already have.We can try to compare total return based on these assumptions.

Customer reply replied 7 years ago

Lev, I appreciate your thoughtful answer and would like to ask for further analysis if you have time to do an hour of work tomorrow- I would be happy to pay a reasonable flat rate. My email address is***@******.*** if you want to email me directly I can give you more info. Part of my confusion is that the person who responded prior to you said it was a "no brainer" to take the W-2 and you are saying that really, depending on deductions, the 1099 may be better. This is basically the response that I arrived at myself (i.e. one is definitely better than the other but it depends on x,y,z...) and is why I am seeking assistance on this site. If you think you can give me an answer based on MY circumstance then that is what I want. If that would require a huge amount of time/ analysis than there is no reason to pursue this further as I have an accountant and have a meeting set up for tomorrow with her to discuss these same issues but I like to get a 2nd opinion for everything and that is where you come in.
SOmething else to consider, I don't have health benefits, I have a "health and welfare stipend" and I believe that if I switched to a 1099 that stays the same. I also have PTO (10 fed holidays and 40 additional hours) and that too should stay if I switched to 1099 (from what I understand given the limited info I got from another contractor). I was originally surprised to see the W-4 because I was under the impression that positions paid hourly (where I am required to keep a time sheet etc.) was for 1099 - and the the health and welfare benefit was how contracting companies dealt with the government requirement that contractors have equivelent benefits to someone in the same position on the federal side. But from what you wrote, I think you are saying that as a W2, the employer taxes are not taken out of this salaried amount? They are separate from the amount I get paid? THat is pretty good! But again we are back to whether or not I can deduct business expenses under MY company that I own (and will keep running over the next year in addition to this position) to compensate for getting taxed on the $250k. OR if it is better to run all the $ through my buisness as a 1099... What do you think is fair to charge to go through this with me? I have pretty much provided you all the info I know- and my question centers on the question of W2 versus 1099 IN MY PARTICULAR SITUATION (not in general... I am not interested in accounting 101).
Thanks. Will pay for the answer you provided already and if you want to continue I will look for a direct email or an email from this site.Lev, sorry I wanted to pay you the amount I orginially agreed to pay ($39) for my original questions as I did not rate the first responder; I did not think they fully understood my question. BUT I don't see where to pay you this amount? I have no button that says "Pay Lev" for your response..? Let me know what to do. Sorry about confusion, I only use this site once in a while...

Tax Professional: Lev, Tax Advisor replied 7 years ago

Appreciate your response.
Generally - to be very precised - we woudl need to prepare your tax returns both ways and compare results.
The problem is that would be mainly based on many assumptions and estimations - but we may have some rough results to compare.
Let start with two possibilities
-- W2 form - just provide expected amounts in boxes 1 and 2
-- as an alternative - 1099MISC with expected amount in box 7.
Then - we need to know estimated business expenses - I assume the same total amount with either W2 or 1099MISC - but different way to deduct such expenses.
Also we need to know amounts and line numbers from your schedule A that you usually deduct (or expect to deduct) - for our estimations - we may use your last year W2.
Thus way - we woudl be able to compare your particular situation and I will run estimations for you to compare..

Lev, Tax Advisor

Category: Tax

Satisfied Customers: 63,556

Experience: Taxes, Immigration, Labor Relations

Verified

Lev and 87 other Tax Specialists are ready to help you

Ask your own question now

Was this answer helpful?

Yes

How JustAnswer works

Describe your issueThe assistant will guide you

Chat 1:1 with a tax professionalLicensed Experts are available 24/7

100% satisfaction guaranteeGet all the answers you need

Related Tax Questions

This Question for LANE Term Life Shareholder Employee pays

This Question for LANE Term Life Shareholder Employee pays his Term Life through his Company. Is this a post tax premium ? How does this affect his wages? Is it treated as S-Corp health where it is on… read more

Lane

JD, MBA, CFP, CRPS

Doctoral Degree

23,751 satisfied customers

I am working on an 1120S. Which box on the company summary

I am working on an 1120S. Which box on the company summary W2 do I put in line 7 and 8 on the 1120S? Also does the employer cost of health insurance go in line 18 employee benefits?… read more

Roxanne625

Master of Accountancy

1,785 satisfied customers

Question for Rick: I would like to know my estimated

Question for Rick:I would like to know my estimated quarterly taxes once I maximize my deductions.If I make roughly $50,000 at my W2 job Then a projected 283,072.05 at my 1099 job.Of the 283,072.05, I… read more

Rick

MBA

27,582 satisfied customers

I would like confirmation on his calculations just to be

I would like confirmation on his calculations just to be sure. He gave great advice but this is a life changing decision … read more

Mr. Tax

CPA

Master's of Science

1,010 satisfied customers

I was preparing my 1099s, going through the exceptions and

Hi Carter - I was preparing my 1099s, going through the exceptions and saw a comment about life insurance being an exception. Not related to 1099s, but is life insurance a deductible expense for a com… read more

Carter McBride

LLM

9,810 satisfied customers

I would like to see the best way to maximize health coverage

I would like to see the best way to maximize health coverage for myself and my wife inside my business.… read more

Robin D.

Senior Tax Advisor 4

Vocational, Technical or Trade School

24,939 satisfied customers

I understand there is IRS requirement for imputed income for

I understand there is IRS requirement for imputed income for company paid term life insurance. I am retired but the company still pays my life insurance policies. They are whole life policies for whic… read more

Lane

JD, MBA, CFP, CRPS

Doctoral Degree

23,751 satisfied customers

I am a business owner.If I take a whole life insurance

Hi I am a business owner.If I take a whole life insurance policy would the premiums be tax deductible.Are there any other benefits of this policy like IRA or 401k thanks… read more

Bill

Master's Degree

3,256 satisfied customers

Are premiums paid for hybrid policies that offer both life

Are premiums paid for hybrid policies that offer both life insurance and long-term care insurance in one product can be deducted as business expense by C-corp?… read more

Lane

JD, MBA, CFP, CRPS

Doctoral Degree

23,751 satisfied customers

I am re-posting this Q because I want to pay twice

I am re-posting this Q because I want to pay twice for two different experts to respond given that there seems to be varying ways of figuring out the situation… I got a thoughtful answer from Lev but … read more

ShawnA

CEO

Bachelor's Degree

2,450 satisfied customers

I have a LTD policy that stipulates that my pre and post disability

I have a LTD policy that stipulates that my pre and post disability income "means your salary, wages, fees, commissions, bonuses, earnings and retirement contributions made by your employer on your be… read more

R. Klein, EA

Tax Advisor

Master's Degree

3,230 satisfied customers

I am a 1099 individual working in the commercial and retail

I am a 1099 individual working in the commercial and retail leasing business. My employer required that I sign an employment contract stating that I was not an employee. I work from their offices, pre… read more

Tax.appeal.168

Principal

8,239 satisfied customers

Below is more of a compound question around tax advice and

Below is more of a compound question around tax advice and a tax strategy for a new firm I established. I would appreciate your answers, so I can take it to the next level to engage a local CPA. I rec… read more

Robin D.

Senior Tax Advisor 4

Vocational, Technical or Trade School

24,939 satisfied customers

I am the 100% owner of an LLC taxed as an S-Corporation. I

I am the 100% owner of an LLC taxed as an S-Corporation. I am the only employee. I am shopping around for a term life insurance policy where the beneficiary is my girlfriend. Is there are tax deductio… read more

Lane

JD, MBA, CFP, CRPS

Doctoral Degree

23,751 satisfied customers

How much money can I spend on personal life insurance, in terms

How much money can I spend on personal life insurance, in terms of PREMIUMS that can be declared as a tax deduction as a sub chapter s corp. Some agents insist that I can deduct up to $50,000.00 yearl… read more

Anne

Master Tax Preparer

2,601 satisfied customers

I am 100% disabled and receive money from SS and from a LTD

I am 100% disabled and receive money from SS and from a LTD Policy my employer had taken out on me. I had paid the premiums for a buy up of 6.67% of my base pay. They paid for 60% of the coverage, so … read more

CGCPA

Owner

Bachelor's Degree

3,815 satisfied customers

My husband has a whole life insurance policy that was opened

My husband has a whole life insurance policy that was opened for him when he was very young after his mother passed away. We recently just opened term life policies for each other and were thinking ab… read more

Anne

Master Tax Preparer

2,601 satisfied customers

My exhusband had an disability insurance policy that was ...

My exhusband had an disability insurance policy that was paid for through his cooperation. He bacame disabled right before he sold his business and during the buyout he paid 1 disability payment and t… read more

legaleagle

Attorney

Doctoral Degree

130 satisfied customers

Disclaimer: Information in questions answers, and Show Less

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

JustAnswer in the News:

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...
T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.
BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.
JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.
OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.
Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!
AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.
GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Tax Attorney

6,083 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

Attorney-at-Law

878 satisfied customers

B.A., M.B.A, J.D.

Loren

Attorney

834 satisfied customers

Over 25 years practicing law

Robin D.

Senior Tax Advisor 4

24,939 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Certified Public Accountant (CPA)

8,667 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

< Previous | Next >

Show MoreShow Less