1099 HELP!

[Stephanie2009]

Ok, so I have read through most of the other forums on this topic and everyone seems to hate being a 1099-er. My question is ..is it really that bad if:

 

1. The job is per diem (so I don't need any benefits from them)

2. Malpractice is covered

3. 65/hr

4. Easy patient load with 10-15pp/day. I've seen quadruple this alone.

 

I have been offered a job with these specs. Its close to home. Should I ask for more (I have 7 years experience) in anticipation of filing 1099 leaving me with nothing at 65/hr? I guess my fear is that taxes will kill me. I have made this amount before as a W2. Should I expect my take home to be the same?

 

HELP! not sure what to expect.

[ventana]

the liability for doing 1099 really falls mostly on the employer 

 

 

The thing you give up is all the bennies and a reasonable wage

 

 

A big one everyone forgets about is workers comp - if you do not have this all you have to fall back on it your own health insurance, and if you do not have a disability policy you are endangering your future income.

 

 

 

 

 

 

As well - every case of 1099 that I have heard get audited has lost - you have to be able to set your own schedule, work when you want to, with your own tools and equipment... obviously none of these are true in almost every case - although I do think house calls it would work for as long as the employee set the schedule.  

 

In a clinic setting no way

 

 

Also, $65/hour is my floor for a per diem job as and employee.  As a 1099 I would want to be listed on med mal, and be close to $100/hour.  

 

 

 

 

but as always, if you really need the job..........

[Sunnyn]

the liability for doing 1099 really falls mostly on the employer 

 

 

The thing you give up is all the bennies and a reasonable wage

 

 

A big one everyone forgets about is workers comp - if you do not have this all you have to fall back on it your own health insurance, and if you do not have a disability policy you are endangering your future income.

 

 

 

 

 

 

As well - every case of 1099 that I have heard get audited has lost - you have to be able to set your own schedule, work when you want to, with your own tools and equipment... obviously none of these are true in almost every case - although I do think house calls it would work for as long as the employee set the schedule.  

 

In a clinic setting no way

 

 

Also, $65/hour is my floor for a per diem job as and employee.  As a 1099 I would want to be listed on med mal, and be close to $100/hour.  

 

 

 

 

but as always, if you really need the job..........

Could you kindly expand upon "every case of 1099 that I have heard get audited has lost "  ?  Is this thru the IRS? and why so?

 

Thanks.

[GetMeOuttaThisMess]

The only additional tax that you pay is the other half of the employment tax. 15.3% versus 7.65%, but you deduct this on your federal return. If you do the math your essentially earning $60/hr. When compared to an employee hire. For those who may not be clear, employment tax is the SS contribution and as a legit 1099 worker you are responsible for both portions.

[Stephanie2009]

Thanks for responding Ventana. I do have a full time that provides me with benefits and short term disability. I also have my own long term disability plan separately. But I see what you mean about losing workers compensation.

 

I am not desperate for the extra money but of course it is nice to have. It seems as if it makes no sense at this rate given I will have a slightly higher amount of SS tax to pay.

 

But I do have a question about a possible audit. Are you saying that as PA's we may not be seen a true independent contractors? If so this could be a problem...

[Stephanie2009]

GetmeOuttathismess thanks! That helps a lot. My internet searches made it seems as if there was more aside from the extra SS.

[GetMeOuttaThisMess]

Here's what I've done in the past when my old ED group went "1099", I created a spreadsheet that showed gross income, computed self-employment tax, computed withholding, any insurance deductions (health/LT disability/dental/life), and RETIREMENT (you have new options for this as a 1099).  This allowed me to see what my take home would be compared to a standard employee situation.  You can use EFTPS online to pay estimated taxes at no additional cost (I paid mine monthly as opposed to quarterly).  Question is often asked about legality of 1099 status.  The IRS has very clear standards that must be met to qualify as 1099 status (IRS.gov and search 1099 qualifications).  Easiest way to be disqualified is to not have absolute and complete control of your work schedule.  Think of it as a day worker for manual labor positions.  If you do not have such control over your work schedule then you right off the bat don't qualify.  With regard to auditing, the responsible party that would be questioned would be the contracting party, not yourself.  As long as you pay your employment taxes and withholding estimate you're golden because if anything you've OVERPAID.  They would have no reason to come after you because you've given them the money.

 

As an aside, my old ED status no more qualified as a 1099 position than the man in the moon.

[Stephanie2009]

Here's what I've done in the past when my old ED group went "1099", I created a spreadsheet that showed gross income, computed self-employment tax, computed withholding, any insurance deductions (health/LT disability/dental/life), and RETIREMENT (you have new options for this as a 1099).  This allowed me to see what my take home would be compared to a standard employee situation.  You can use EFTPS online to pay estimated taxes at no additional cost (I paid mine monthly as opposed to quarterly).  Question is often asked about legality of 1099 status.  The IRS has very clear standards that must be met to qualify as 1099 status (IRS.gov and search 1099 qualifications).  Easiest way to be disqualified is to not have absolute and complete control of your work schedule.  Think of it as a day worker for manual labor positions.  If you do not have such control over your work schedule then you right off the bat don't qualify.  With regard to auditing, the responsible party that would be questioned would be the contracting party, not yourself.  As long as you pay your employment taxes and withholding estimate you're golden because if anything you've OVERPAID.  They would have no reason to come after you because you've given them the money.

 

As an aside, my old ED status no more qualified as a 1099 position than the man in the moon.

 

 

Thanks! Spread sheet comparison is a great idea!

[Stephanie2009]

Thanks! Spread sheet comparison is a great idea!

 

 

Also thanks for that EFTPS site. Did you find that doing your own deductions became stressful or did you turf it off to an accountant. Debating whether or not to get an accountant. I would like to avoid it.

[GetMeOuttaThisMess]

Did it all myself, though I see myself as a frustrated accountant. I've just always enjoyed crunching numbers.

[ventana]

If you do a spread sheet make to add in disability and workers comp

 

Disability is a nicety and not all employers have it, but workers comp is a requirement, and if you get hurt at work it is a must have.......

[GetMeOuttaThisMess]

Never had to pay w/c here in Texas as a 1099. Self-insured status an option here.

[electric130]

I recently took a very part time 1099 position.  I was offered a full time position and turned that down, full time 1099 I think is rarely a good deal for the employee unless you are being paid a very high rate.  I will tell you why I took this position and pros and cons.  I calculated after I take the deduction for paying self employment taxes that I would pay an extra 7.5% on this extra income, however after taking some of the deductions that are allowed with working from home I anticipate that to be somewhat less.  I think there is some benefit to having a very small amount of 1099 income for a couple reasons.

 

I have a W2 position with vacation, 401k and plenty of insurance options (I have tricare so don't worry about health insurance) so this was never an issue for me.

I work 3 days/week at my primary W2 position and 1-2, 7 hour days at this other position.  My 1099 position is working at home, so I will have new deductions (home office, cell phone, internet) that I can legitimately take.  I also factored in that I would be able to pick up my kids after school and save paying our sitter 50 dollars a day.  That in itself saves me 75 dollars that I have to make before taxes.  I also factored in commuting costs which I have none with this position vs the W2 position.  These are not necessarily things that will affect you, but just things that played into my decision.

 

Another benefit for me personally is having the option to start a solo 401k which I plan on doing this year.  My husband and I max our 401ks, and I have a 401k available at my W2 position with profit sharing.  I do not like their funds and they have a high ER, so I plan to max out my solo 401k that I am setting up with vanguard, this is really only a benefit if you don't have a very good 401k with your W2 employer, otherwise it really wouldn't matter.  

 

I think it just depends on pay rate and how much the extra income would help you meet certain goals vs having extra time with family.  I honestly would rather this position be W2, but this is what was offered and I have done some research to try to get as much benefit from this as I can.  I also wanted to diversify my income streams as I think as a PA having a couple different positions can be somewhat psychologically beneficial.  Honestly if I get fed up enough with my W2 position (it is tremendously more stressful) I could possibly increase my hours with my other position and be fine until I found another clinical position.  I totally agree with the thoughts above and some really good advice, I do think looking at the whole picture though makes for the best decision.  If you have a very short commute and it is really low stress it may be worth doing a few hours here and there for some extra income, you also may be able to see if they would consider changing it to W2 possibly.  Good luck to you!

[GetMeOuttaThisMess]

Very smart move on the self 401K. Folks tend to get caught up in returns but expenses can eat you alive (I'm with Vanguard as well and have been for decades due to low costs and their funds beating 75% or more of managed funds in the same class). Don't leave free money on the table with employers who offer a match up to a point.

[electric130]

My W2 employer doesn't do a match, it is a set percentage they automatically put in whether you contribute or not, which is kind of nice that I will be able to put everything into the solo 401k.  I absolutely agree, would never leave a match on the table.  We will have my husband's TSP and our vanguard 401k, really can't get any better imo for low cost well performing funds. 

[AliB]

My W2 employer doesn't do a match, it is a set percentage they automatically put in whether you contribute or not, which is kind of nice that I will be able to put everything into the solo 401k.  I absolutely agree, would never leave a match on the table.  We will have my husband's TSP and our vanguard 401k, really can't get any better imo for low cost well performing funds. 

 

 

You may already be taking this into account, and do confirm with your financial advisor, or course, but my understanding is that if they are both retirement accounts set up under 401(k), the "combined" contribution total is subject to the IRS maximums for the year in question. 

[GetMeOuttaThisMess]

You may already be taking this into account, and do confirm with your financial advisor, or course, but my understanding is that if they are both retirement accounts set up under 401(k), the "combined" contribution total is subject to the IRS maximums for the year in question. 

 

 

Correct, however the OP can open an SEP-IRA w/o the same restriction based on the 1099 income level.

[electric130]

Yes, I know I can only put the max allowed by irs for each year into one 401k account or the other, thanks for putting that out there though for those that may not realize that.. I did look into a sep ira, decided against that for various reasons. If we do two back door roths and max two 401ks plus put into our 529s for our kids that is around 50k savings per year or so which is plenty for us and still leaves us a comfortable life style.

[GetMeOuttaThisMess]

I applaud your foresight. This is where so many are getting into trouble present day, especially with kids college education costs. I am so thankful we got into our state's guaranteed tuition plan for our daughter when it was available. We still had to cover about $60K but it was all paid for at time of graduation. Don't know if she fully realizes what a blessing that was for her (and us) with having no debt (I believe she does). We've provided a modest stipend for the past year, cutting it in half next month as agreed upon, and will fully withdraw it this time next year.

[Boatswain2PA]

I'm (mostly) 1099 and I love it.  My CPA says I'm doing it right.  I'm in control of my money, my retirement, my business, and (most importantly) my schedule!