I have my own business where I offer my services as a software engineer to companies in the U.S. I have worked for a month or so for a new client at X dollars per hour. The client likes my work, and has now offered me a 3 year 1099 contract at Y dollars per hour AND health insurance on top of that (40 hours per week or so according to client). With respect to the hourly rate, the client is offering 75% of what he's paying me now. In return I'll get health insurance and a long-term 1099 contract. I'm wondering if it's a good deal and I'm looking for advice from experienced 1099 contractors who have some advice & thoughts to share. 1. What would you require that the 1099 states if you were to sign one? I don't want to get screwed. 2. With a regular W2 employee type of deal, I know that I have to pay between 25-30% of my gross salary in taxes. If I calculate my estimated yearly gross income on a 1099, how much of that do I have to pay in taxes? (just a rule-of-thumb). Is it 25% or maybe 40% 3. Can I deduct business expenses from the gross income on the 1099 contract? 4. Can I file the 1099 income as business income for my LLC ? Any benefits to that? 5. An example of what a 1099 independent software contractor agreement should look like would be nice to have. Any advice is greatly appreciated. Thank you!
Off-topic: Questions about 1099 contracts
Started by ●August 23, 2013
Reply by ●August 23, 20132013-08-23
On Thu, 22 Aug 2013 20:38:15 -0700 (PDT), jmacchi1965@gmail.com wrote:>The client likes my work, and has now offered me a 3 year 1099 contract at Y dollars per hour AND health insurance on top of that (40 hours per week or so according to client). > >With respect to the hourly rate, the client is offering 75% of what he's paying me now. In return I'll get health insurance and a long-term 1099 contract. > >I'm wondering if it's a good deal and I'm looking for advice from experienced 1099 contractors who have some advice & thoughts to share.You're asking for legal advice from people whose expertise is not in legal matters. Everything that I say in the following is OPINION, not advice. I am not qualified to offer legal advice. The only actual advice that I offer is that you seek qualified legal advice.>1. What would you require that the 1099 states if you were to sign one? I don't want to get screwed.Clear, explicit descriptions of what you are to do (Statement of Work), when you should do it (schedule), and how much you will be paid for it. Clear, explicit descriptions of anything for which you will NOT be paid. Clear, explicit descriptions of anything that you are expected to provide (computer, software, etc.) Clear, explicit descriptions of things for which you are NOT responsible. Keep in mind that you can contribute to the contract language as much as the client. If there are any provisions that you want, add the clauses yourself. Make certain to add a clause that forces the client to acknowledge that you may have other clients, in the past, present, or future, whose intellectual property you need to protect, and that this client makes no claim whatsoever to the intellectual property of those others. Talk to a contracts lawyer.>2. With a regular W2 employee type of deal, I know that I have to pay between 25-30% of my gross salary in taxes. If I calculate my estimated yearly gross income on a 1099, how much of that do I have to pay in taxes? (just a rule-of-thumb). Is it 25% or maybe 40%You have to pay both sides of FICA. Normally half is paid by your employer. So that adds something like 7% (I forget the exact number) of your gross to your Federal Tax bill right away. Since the client has put a dollar value (25% of what he's paying you now) on your health insurance, check to see if your health benefits might be taxable as income. Talk to a tax lawyer.>3. Can I deduct business expenses from the gross income on the 1099 contract?You can deduct legitimate business expenses. You must keep records, and the expenses must meet strict qualifications. Talk to a tax lawyer.>4. Can I file the 1099 income as business income for my LLC ? Any benefits to that?Unless your client is explicitly hiring your LLC, and not you personally, probably not. Talk to a tax lawyer.>5. An example of what a 1099 independent software contractor agreement should look like would be nice to have.Every one is different. Before you sign, show it to a contracts lawyer and get their advice.>Any advice is greatly appreciated. Thank you!No advice given, other than to see a lawyer. The price of an hour of a lawyer's time is well worth it if it avoids contract disputes later.
Reply by ●August 23, 20132013-08-23
On Thursday, August 22, 2013 11:38:15 PM UTC-4, John Macchi wrote:> I have my own business where I offer my services as a software engineer to companies in the U.S. > > > > I have worked for a month or so for a new client at X dollars per hour. > > > > The client likes my work, and has now offered me a 3 year 1099 contract at Y dollars per hour AND health insurance on top of that (40 hours per week or so according to client). > > > > With respect to the hourly rate, the client is offering 75% of what he's paying me now. In return I'll get health insurance and a long-term 1099 contract. > > > > I'm wondering if it's a good deal and I'm looking for advice from experienced 1099 contractors who have some advice & thoughts to share. > > > > 1. What would you require that the 1099 states if you were to sign one? I don't want to get screwed. > > > > 2. With a regular W2 employee type of deal, I know that I have to pay between 25-30% of my gross salary in taxes. If I calculate my estimated yearly gross income on a 1099, how much of that do I have to pay in taxes? (just a rule-of-thumb). Is it 25% or maybe 40% > > > > 3. Can I deduct business expenses from the gross income on the 1099 contract? > > > > 4. Can I file the 1099 income as business income for my LLC ? Any benefits to that? > > > > 5. An example of what a 1099 independent software contractor agreement should look like would be nice to have. > > > > Any advice is greatly appreciated. Thank you!Yes, Greg is right. For FICA and Medicare, you now pay both halves. Employee pays 7.65% and the employer pays 7.65%. If self employed, you pay both halves (15.3% off of the top!). The 7.65% breaks down into two components a 6.2% SS and a 2.45% medicare. The 6.2% portion has a salary cap on it meaning one you hit the cap you will top out the 6.2% portion. The 2.45% portion has no cap. The 2013 salary cap is $113,700 expected to rise to %115,500 for tax year 2014. About expenses and such, you can write off stuff, but you will need to see a CPA because your filing status (individual, S-Corp, C-Corp, etc) will strongly affect your taxes and permissible deductions. You will need to set up a separate business account because you don't want to comingle personal and business expenses. See a CPA! Clay
Reply by ●August 23, 20132013-08-23
clay@claysturner.com writes:> On Thursday, August 22, 2013 11:38:15 PM UTC-4, John Macchi wrote: >> I have my own business where I offer my services as a software engineer to companies in the U.S. >> >> >> >> I have worked for a month or so for a new client at X dollars per hour. >> >> >> >> The client likes my work, and has now offered me a 3 year 1099 contract at Y dollars per hour AND health insurance on top of that (40 hours per week or so according to client). >> >> >> >> With respect to the hourly rate, the client is offering 75% of what he's paying me now. In return I'll get health insurance and a long-term 1099 contract. >> >> >> >> I'm wondering if it's a good deal and I'm looking for advice from experienced 1099 contractors who have some advice & thoughts to share. >> >> >> >> 1. What would you require that the 1099 states if you were to sign one? I don't want to get screwed. >> >> >> >> 2. With a regular W2 employee type of deal, I know that I have to >> pay between 25-30% of my gross salary in taxes. If I calculate my >> estimated yearly gross income on a 1099, how much of that do I have >> to pay in taxes? (just a rule-of-thumb). Is it 25% or maybe 40% >> >> >> >> 3. Can I deduct business expenses from the gross income on the 1099 contract? >> >> >> >> 4. Can I file the 1099 income as business income for my LLC ? Any benefits to that? >> >> >> >> 5. An example of what a 1099 independent software contractor agreement should look like would be nice to have. >> >> >> >> Any advice is greatly appreciated. Thank you! > > Yes, Greg is right. For FICA and Medicare, you now pay both halves. > Employee pays 7.65% and the employer pays 7.65%. If self employed, you > pay both halves (15.3% off of the top!). The 7.65% breaks down into > two components a 6.2% SS and a 2.45% medicare. The 6.2% portion has a > salary cap on it meaning one you hit the cap you will top out the 6.2% > portion. The 2.45% portion has no cap. The 2013 salary cap is $113,700 > expected to rise to %115,500 for tax year 2014.Isn't another benefit of 1099 that there is an unemployment tax he won't have to pay? I seem to remember the difference is unemployment tax + half FICA. --RY> > About expenses and such, you can write off stuff, but you will need to > see a CPA because your filing status (individual, S-Corp, C-Corp, etc) > will strongly affect your taxes and permissible deductions. You will > need to set up a separate business account because you don't want to > comingle personal and business expenses. > > See a CPA! > > Clay-- Randy Yates Digital Signal Labs http://www.digitalsignallabs.com
Reply by ●August 23, 20132013-08-23
On Thu, 22 Aug 2013 20:38:15 -0700 (PDT), jmacchi1965@gmail.com wrote:>I have my own business where I offer my services as a software engineer to = >companies in the U.S. > >I have worked for a month or so for a new client at X dollars per hour. > >The client likes my work, and has now offered me a 3 year 1099 contract at = >Y dollars per hour AND health insurance on top of that (40 hours per week o= >r so according to client). > >With respect to the hourly rate, the client is offering 75% of what he's pa= >ying me now. In return I'll get health insurance and a long-term 1099 contr= >act. > >I'm wondering if it's a good deal and I'm looking for advice from experienc= >ed 1099 contractors who have some advice & thoughts to share. > >1. What would you require that the 1099 states if you were to sign one? I d= >on't want to get screwed. > >2. With a regular W2 employee type of deal, I know that I have to pay betwe= >en 25-30% of my gross salary in taxes. If I calculate my estimated yearly g= >ross income on a 1099, how much of that do I have to pay in taxes? (just a = >rule-of-thumb). Is it 25% or maybe 40% > >3. Can I deduct business expenses from the gross income on the 1099 contrac= >t?I'll just add a little bit to what has already been said, but I'd suggest talking to a good accountant, and use that accountant for your tax filing. A good accountant (CPA) can easily pay for themselves at the end of the year in tax savings. An accountant can help you with managing deductions of business expenses, etc., but generally, yes, you can deduct legitimate business expenses from your 1099 income. Again, get proper professional advice about what that means, rather than from a forum like this.>4. Can I file the 1099 income as business income for my LLC ? Any benefits = >to that?As was mentioned, I think your LLC has to be hired directly to do this, but check with a good accountant.>5. An example of what a 1099 independent software contractor agreement shou= >ld look like would be nice to have. > >Any advice is greatly appreciated. Thank you!Eric Jacobsen Anchor Hill Communications http://www.anchorhill.com
Reply by ●August 23, 20132013-08-23
On Thu, 22 Aug 2013 20:38:15 -0700, jmacchi1965 wrote:> I have my own business where I offer my services as a software engineer > to companies in the U.S. > > I have worked for a month or so for a new client at X dollars per hour. > > The client likes my work, and has now offered me a 3 year 1099 contract > at Y dollars per hour AND health insurance on top of that (40 hours per > week or so according to client). > > With respect to the hourly rate, the client is offering 75% of what he's > paying me now. In return I'll get health insurance and a long-term 1099 > contract. > > I'm wondering if it's a good deal and I'm looking for advice from > experienced 1099 contractors who have some advice & thoughts to share. > > 1. What would you require that the 1099 states if you were to sign one? > I don't want to get screwed. > > 2. With a regular W2 employee type of deal, I know that I have to pay > between 25-30% of my gross salary in taxes. If I calculate my estimated > yearly gross income on a 1099, how much of that do I have to pay in > taxes? (just a rule-of-thumb). Is it 25% or maybe 40% > > 3. Can I deduct business expenses from the gross income on the 1099 > contract? > > 4. Can I file the 1099 income as business income for my LLC ? Any > benefits to that? > > 5. An example of what a 1099 independent software contractor agreement > should look like would be nice to have. > > Any advice is greatly appreciated. Thank you!Someone is confused in this post, and I don't think it's me. DISCLAIMER: I ain't no lawyer. Get both tax and legal advice and expect to pay for it. If you're in the Portland, Oregon area I'll recommend you a good lawyer and a good accountant. The "1099" isn't a contract type, it's a tax form used by companies to document large expenses to the IRS. When a company has you do work, they pay you, then they file a 1099 form with the IRS, then they send you a copy. So if you're really offering contracting services already, you should be getting these already. A company cannot, under the tax code, hide regular employees under the banner of independent contractors. To be kosher, a contractor has to have an independent business with more than one customer, he has to be allowed to set his own hours, and it really, really helps if he has an independent place of business. The level of scrutiny rises significantly after said contractor has been working at a place for a year. A 40 hour/ week gig for three years, with health insurance, is sounding pretty much like a regular employee to me. You may not get in trouble over this, but you should be wondering why your prospective client/employer is so naive to the rules. You've gotten the rules of thumb for taxes. But you should already know this if you've been independently contracting. If you're really an independent business, then you can deduct some expenses. Your accountant should know which ones. Yes to business income and expenses, but talk to that accountant!! You really sound like you need to know more, and it shouldn't come from me. You need talk to a lawyer and a tax guy. If you haven't already done so, I highly recommend that you run any contract by your lawyer before you sign, at least until you feel you know the lingo well enough to know what's safe and what you need to have reviewed. Keep in mind that most contracts are negotiable, and many companies will start by handing you a contract that's filled with "gotchas" that they will happily leave out if you catch them. Remember that you are not just a guy doing software -- you're a business owner, and as such you need to get the business stuff as well as the software stuff right. If that's just too overwhelming, then close up your shop and tell your 3-year client that you'd just as soon be a W-2 employee, if it's all the same to them. -- Tim Wescott Wescott Design Services http://www.wescottdesign.com
Reply by ●August 23, 20132013-08-23
On 8/23/13 6:35 AM, Greg Berchin wrote:> You're asking for legal advice from people whose expertise is not > in legal matters. Everything that I say in the following is > OPINION, not advice. I am not qualified to offer legal advice. The > only actual advice that I offer is that you seek qualified legal > advice. >...> > Talk to a contracts lawyer. >...> > Talk to a tax lawyer. >...> > Talk to a tax lawyer. >...> > Talk to a tax lawyer. >> Before you sign, show it to a contracts lawyer and get their advice. > >> Any advice is greatly appreciated. Thank you! > > No advice given, other than to see a lawyer. The price of an hour > of a lawyer's time is well worth it if it avoids contract disputes > later.that is one well-covered gluteous maximus. -- r b-j rbj@audioimagination.com "Imagination is more important than knowledge."
Reply by ●August 23, 20132013-08-23
Den fredag den 23. august 2013 19.58.49 UTC+2 skrev Tim Wescott:> On Thu, 22 Aug 2013 20:38:15 -0700, jmacchi1965 wrote: > > > > > I have my own business where I offer my services as a software engineer > > > to companies in the U.S. > > > > > > I have worked for a month or so for a new client at X dollars per hour. > > > > > > The client likes my work, and has now offered me a 3 year 1099 contract > > > at Y dollars per hour AND health insurance on top of that (40 hours per > > > week or so according to client). > > > > > > With respect to the hourly rate, the client is offering 75% of what he's > > > paying me now. In return I'll get health insurance and a long-term 1099 > > > contract. > > > > > > I'm wondering if it's a good deal and I'm looking for advice from > > > experienced 1099 contractors who have some advice & thoughts to share. > > > > > > 1. What would you require that the 1099 states if you were to sign one? > > > I don't want to get screwed. > > > > > > 2. With a regular W2 employee type of deal, I know that I have to pay > > > between 25-30% of my gross salary in taxes. If I calculate my estimated > > > yearly gross income on a 1099, how much of that do I have to pay in > > > taxes? (just a rule-of-thumb). Is it 25% or maybe 40% > > > > > > 3. Can I deduct business expenses from the gross income on the 1099 > > > contract? > > > > > > 4. Can I file the 1099 income as business income for my LLC ? Any > > > benefits to that? > > > > > > 5. An example of what a 1099 independent software contractor agreement > > > should look like would be nice to have. > > > > > > Any advice is greatly appreciated. Thank you! > > > > Someone is confused in this post, and I don't think it's me. > > > > DISCLAIMER: I ain't no lawyer. Get both tax and legal advice and expect > > to pay for it. If you're in the Portland, Oregon area I'll recommend you > > a good lawyer and a good accountant. > > > > The "1099" isn't a contract type, it's a tax form used by companies to > > document large expenses to the IRS. When a company has you do work, they > > pay you, then they file a 1099 form with the IRS, then they send you a > > copy. So if you're really offering contracting services already, you > > should be getting these already. > > > > A company cannot, under the tax code, hide regular employees under the > > banner of independent contractors. To be kosher, a contractor has to > > have an independent business with more than one customer, he has to be > > allowed to set his own hours, and it really, really helps if he has an > > independent place of business. The level of scrutiny rises significantly > > after said contractor has been working at a place for a year. A 40 hour/ > > week gig for three years, with health insurance, is sounding pretty much > > like a regular employee to me. You may not get in trouble over this, but > > you should be wondering why your prospective client/employer is so naive > > to the rules. >I believe getting all his money confiscated over that was what triggered this: http://en.wikipedia.org/wiki/2010_Austin_suicide_attack -Lasse
Reply by ●August 23, 20132013-08-23
On Fri, 23 Aug 2013 12:41:54 -0700 (PDT), langwadt@fonz.dk wrote:>Den fredag den 23. august 2013 19.58.49 UTC+2 skrev Tim Wescott: >> On Thu, 22 Aug 2013 20:38:15 -0700, jmacchi1965 wrote: >> >> >> >> > I have my own business where I offer my services as a software engineer >> >> > to companies in the U.S. >> >> > >> >> > I have worked for a month or so for a new client at X dollars per hour. >> >> > >> >> > The client likes my work, and has now offered me a 3 year 1099 contract >> >> > at Y dollars per hour AND health insurance on top of that (40 hours per >> >> > week or so according to client). >> >> > >> >> > With respect to the hourly rate, the client is offering 75% of what he's >> >> > paying me now. In return I'll get health insurance and a long-term 1099 >> >> > contract. >> >> > >> >> > I'm wondering if it's a good deal and I'm looking for advice from >> >> > experienced 1099 contractors who have some advice & thoughts to share. >> >> > >> >> > 1. What would you require that the 1099 states if you were to sign one? >> >> > I don't want to get screwed. >> >> > >> >> > 2. With a regular W2 employee type of deal, I know that I have to pay >> >> > between 25-30% of my gross salary in taxes. If I calculate my estimated >> >> > yearly gross income on a 1099, how much of that do I have to pay in >> >> > taxes? (just a rule-of-thumb). Is it 25% or maybe 40% >> >> > >> >> > 3. Can I deduct business expenses from the gross income on the 1099 >> >> > contract? >> >> > >> >> > 4. Can I file the 1099 income as business income for my LLC ? Any >> >> > benefits to that? >> >> > >> >> > 5. An example of what a 1099 independent software contractor agreement >> >> > should look like would be nice to have. >> >> > >> >> > Any advice is greatly appreciated. Thank you! >> >> >> >> Someone is confused in this post, and I don't think it's me. >> >> >> >> DISCLAIMER: I ain't no lawyer. Get both tax and legal advice and expect >> >> to pay for it. If you're in the Portland, Oregon area I'll recommend you >> >> a good lawyer and a good accountant. >> >> >> >> The "1099" isn't a contract type, it's a tax form used by companies to >> >> document large expenses to the IRS. When a company has you do work, they >> >> pay you, then they file a 1099 form with the IRS, then they send you a >> >> copy. So if you're really offering contracting services already, you >> >> should be getting these already. >> >> >> >> A company cannot, under the tax code, hide regular employees under the >> >> banner of independent contractors. To be kosher, a contractor has to >> >> have an independent business with more than one customer, he has to be >> >> allowed to set his own hours, and it really, really helps if he has an >> >> independent place of business. The level of scrutiny rises significantly >> >> after said contractor has been working at a place for a year. A 40 hour/ >> >> week gig for three years, with health insurance, is sounding pretty much >> >> like a regular employee to me. You may not get in trouble over this, but >> >> you should be wondering why your prospective client/employer is so naive >> >> to the rules. >> > >I believe getting all his money confiscated over that was what triggered this: > >http://en.wikipedia.org/wiki/2010_Austin_suicide_attack > > >-LasseLooks like that was just long-term tax evasion. I've known people who got themselves into similar problems. But Tim did point out something important, which is that it is in the OP's interest to figure out what's going on and make sure that he's handling things in a way that doesn't get him into trouble later. Eric Jacobsen Anchor Hill Communications http://www.anchorhill.com
Reply by ●August 23, 20132013-08-23
