Taxes/salary question

[luckyducky]

Perhaps this should go in the journalism folder, but whatev... I'm trying to help my friend figure out a job offer.

Here's a job hypothetical:

$2,500 per month flat fee; pay your own taxes and health insurance and such...how much would that run? And, technically, you're not classified as an independent contractor (because they'll be able to pay for her travel, rather than her paying and getting reimbursed) - so I don't know exactly all the taxes to help her out...

Advice and such? How much $$ would all the taxes and everything run? Is there an IRS site that can help me figure it out?

Thanks!

 

[playthrough]

You're an independent contractor if your paychecks don't have taxes, soc security, etc., taken out before you get them. Because of that, she's going to have to sock aside 25-30 percent of every check to ensure she isn't clobbered on April 15. It takes discipline.

I don't know if your friend has another job on top of this, but this situation sounds almost exactly like a gig I had for two years after college in terms of the salary and paying my own taxes/insurance. It wasn't easy.

 

[forever_town]

Agreed with playthrough. At my current gig, I wasn't getting taxes taken out because the bosses were running background checks through an auditing company.

A month after I first began working there, I got word that I was cleared. My next paycheck had taxes taken out.

 

[Ace]

$2,500 a month would be $30,000 a year, which would be in the 15 percent tax bracket, which would mean $4500 in taxes or $375 per month. That doesn't include state taxes.

Medical would depend on whatever kind of insurance deal your friend could work out. But I would say it's probably an average of $2,000 a year or $166 a month.

So take $550 off the top of that offer.

 

[OTD]

First, that sounds a little fishy--you're either an independent contractor or an employee. I'm pretty sure the IRS wouldn't like this arrangement too much.

And speaking of our friends at the IRS, be sure to remind her to pay quarterly taxes if she takes this gig. They frown on paying them all on April 15.

 

[WildBillyCrazyCat]

Ace, I would say that any sort of decent insurance would cost much more than $2K per year.

 

[Lieslntx]

Understand something else. If you are in independent contractor, you have to pay double the Social Security and Medicare taxes (the contractor has to cover the matching that an employer usually covers.) This means that 15% will not cover the taxes come April 15. Go for 20%-25% to cover this extra expense.

If the company is not taking out taxes, then you are an independent contractor.

 

[Ace]

Ace, I would say that any sort of decent insurance would cost much more than $2K per year.

Oh, decent insurance? It would all depend on what kind and how well covered. You could probably do a high deductible, etc. But then you pay as you go.

 

[Lieslntx]

My decent (and by decent I mean affordable) insurance for a husband, wife and college-age child is $531 per month, with $7,500 deductibles per person, up to a maximum of $15,000 for the family. That is for three healthy people.

Something to keep in mind.

 

[RedSmithClone]

You're an independent contractor if your paychecks don't have taxes, soc security, etc., taken out before you get them. Because of that, she's going to have to sock aside 25-30 percent of every check to ensure she isn't clobbered on April 15. It takes discipline.

I don't know if your friend has another job on top of this, but this situation sounds almost exactly like a gig I had for two years after college in terms of the salary and paying my own taxes/insurance. It wasn't easy.

Until BHO is elected and she needs to put aside 55 percent of her salary in just Federal taxes.

 

[jgmacg]

RSC's partisan caterwauling notwithstanding, keep at least 1/3 of your earnings set aside for taxes and Social Security. Try to pay the IRS quarterly, as noted above. Find an affordable health care plan that suit your needs. There are lots of policies available online, with coverages that vary from state to state, so you can usually find something affordable.

On a brighter note, if you're being paid as an independent contractor, you'll also have many more deductions come tax time.

 

[trifectarich]

Putting something aside every month to take care of the tax man? Wow, this is a dicey proposition. 99.9 percent of people can't do it. Be careful.

 

[93Devil]

My decent (and by decent I mean affordable) insurance for a husband, wife and college-age child is $531 per month, with $7,500 deductibles per person, up to a maximum of $15,000 for the family. That is for three healthy people.

Something to keep in mind.

I have very good insurance from my employer and I kick in $400 a month for a wife and a baby.

I think they kick $600 to $700 per month.

Whenever you talk about a position with HR, most times they will say $65,000 for a $40,000 position because of all of the benefits added into the salary.

I hate to say it, but $2,500 will not be that much after everything is sliced out.

 

[luckyducky]

Wow, tons of advice, good and bad. Thanks folks!

My friend is single, with only her own (typically "fairly cheap") medical bills to pay. And, apparently, it is an independent contractor situation, just without a contract (I know, sketchy...). Apparently some Rivals or Scout-type thing (she knows, but I like to keep things vague).

It sounds like she's really considering taking it, so any last words of warning or advice I can throw her way before she jumps in over her head?

 

[jgmacg]

It's not that unusual to do work like this without a contract.

She's essentially in the same boat as most freelancers. She'll be earning 1099 income (that's the form you receive stating independent, untaxed earnings), so please tell her that she has to begin thinking of herself as a small business. She needs to set aside her likely tax bite, as stated. If she can't discipline herself to do this she'll be in genuine trouble come tax time. She needs to save every receipt. She needs to learn the broad outlines of tax law governing the operation of a small business, and how to itemize her deductions - for example the 'home office' deduction. She'll have to be much more alert and responsible to this kind of stuff than she has been in the past.

She may be eligible to join something like the Freelancers' Union, which would allow her the chance to buy into their group health plan.

She may also want to begin developing other freelance relationships, so that she has a transitional income if this job suddenly disappears.

 

[93Devil]

Her car (gas) will be a write off. That is a huge potential write off.

Good advice about the "office" in her home.

 

[JR]

Fascinating how this differs from country to country.

Up here there's no way on God's green earth that this person could be considered an independent contractor if this "job offer" was for a full time gig.

Sbe'd be considered an employee. Taxes, unemployment insurance and Canada Pension Plan would be deducted from each pay cheque plus the employer would have to make their contributions to the last two.

Back in the 90's the government closed the door on the scam where companies would have full time employees on the books as "contract workers" to avoid having to pay benefits. They'd take into consideration little things like whether the "contract worker" had their own extension at their office and whether they had voice mail.

And there's no way anyone who had a full time job with one employer would ever get away with calling themselves a freelancer. The Canada Revenue Agency (our IRS) would be all over that.

 

[MacDaddy]

"Taxes? Don't worry about taxes."

 

[mustangj17]

Her car (gas) will be a write off. That is a huge potential write off.

Good advice about the "office" in her home.

My car, gas, computer, voice recorder, pens, notebooks, internet subscription (work from home), electricity, cable subscription (for covering random events via blog) are all write offs for me.

Still afraid I'm not putting up aside. I might be back on Ramen come next spring.

 

[playthrough]

The write-offs can be endless...even your SportsJournalists.com membership!