It sounds like your new position is a 1099 position rather than a w-2 position. This means you only get paid via contract and you aren't an employee and don't have any benefits etc. In addition to you having to withhold your own taxes, this also means that you'll have to pay things that an "employer" normally would like the employer portion of social security and medicare. I'd do some research on the differences so that you understand them.
As a result of getting paid 1099, you are already your own company. Its a sole proprietorship where your company name is your own personal name. You can do a solo 401k with fidelity and its free. I would recommend pursuing it if we are talking about more than 2k/year in income.
I would recommend googling and doing some research to understand your responsibilities when getting paid 1099. You will be (at least partially) self employed, have to do more tax related work, file a schedule C, etc. On the flipside, you can deduct some stuff as a business expense.
You should be also be paid more as a 1099 than as an employee because you are shouldering a lot of responsibility/tax burden that normally you would not have to as a w-2 employee.
you got it. I'm not an employee actually...sorry I wasn't clear...I'm not all familiar with all the tax jargon. The contract says I'm not an employee. But I could get more similar gigs...hopefully.
Paraphrasing the contract, it says it's not an employment agreement or guarantee of assigned work for any specific period of time. The relationships is "at will". Understands not a full time Equivalent employee as defined by Dept of Labor...not eligible for benefits...etc. Nor am I planning/expecting to be an employee. This arrangement works fine if I can throw $$ into a 401K.
I think it's 1099 because on page 1 of the W-9, there's a lot of Form 1099-INT, DIV, MISC, B etc on the Purpose of Form.
Haven't a clue I'm paid more or not, but it's not low per assignment. 40 hours of work would be over a grand I guess.
No clue where to start though...I can just call the brokerage, give my SS, tell them what's going on? I'm guessing I need to fill out the W-9 a different way? Or the W-9 is just for my employer and they don't need to know how I'm contributing to a i401k? It's asking about Business name (not sure I need) and federal tax classification C corporation, S corporation, Partnership, Trust/estate, LLC, Enter tax class, other, or
individual/sole proprietor or single-member LLC (i think it's that one, can do i401k?
Just curious, why >$2K is it worth it?
exactly, as an employee (W2) your company pays half your medicare/SS tax, so if you are a 1099, make sure youre grossed-up from your previous wages, as you are now responsible for all of it. But yes as a 1099 you can open your i401k - I did mine through Vanguard as a Sole-Prop (free EIN from IRS, not sure if it's necessary to open a 401k, but i think it is). Also apparently VG only allows you to open mutual funds in your i401k, which seems odd to me.
But a pretty sweet set-up, i was able to put 33k in there last year - rather than the 18k elsewhere, downside is i'm providing my own match, so no "free" money (other than the tax savings of course)
Wait you can contribute more than >18K/year into a 401k??! I read something on employee deferral...is that why?
Thanks guys/gals...it's getting to be clearer.