Comparing W2 and 1099 gigs

[WorkingToUnwind]

My brain is trying to wrap itself around the nuances of being paid as a W2 employee vs a 1099 independent contractor. Right now, I'm paid as an independent contractor. I have the opportunity to take a position where I'd be a W2 employee. Assuming my gross income is the same, would I lose out as a W2 employee because of losing the 20% pass through deduction? It seems in the past because of self-employment tax, being a W2 employee would usually be better but now that we have the Trumps' 2018 20% pass through to factor in, being an independent contractor would be better. I don't have a lot of business deductions, maybe $3,000 between a home-office deduction and some other expenses.

[bacchi]

Personally, I'd do a quick comparison using tax software.

1) Does the W2 job have good benefits?
2) A solo 401k is an awesome tool. How good is the W2 401k match?
3) What are the work hours and culture? Is 40 hours really 50 hours?

[WorkingToUnwind]

Personally, I'd do a quick comparison using tax software.

1) Does the W2 job have good benefits?
2) A solo 401k is an awesome tool. How good is the W2 401k match?
3) What are the work hours and culture? Is 40 hours really 50 hours?

Ah, great idea on using tax software.

W2 has mediocre benefits. I'd just get the 401k match, which is 4%. We're on my husband's health insurance and I wouldn't work enough to qualify for the other benefits.

I have a SEP IRA but it sounds like I should switch to a solo.

I would set my own hours at the W2, so it would have a similar feel to my 1099 job in terms of how grueling each day would be. It's better run, but it's also a big corporation rather than the mom and pop place I currently work for.

[IsThisAGoodUsername]

As a 1099 employee, you'll have to pay the self employment tax (both Medicare and Social Security).  That's another 7.65% that you have to pay. Or if you're W2, the employer pays this 7.65%.

https://www.thebalancesmb.com/i-received-a-1099-misc-form-what-do-i-do-with-it-398610
https://www.irs.gov/taxtopics/tc751

Semi-related: If you think you're going to hit the income limits for contributing to a Roth IRA, consider opening a Solo 401k and moving your SEP-IRA money into it (and Traditional IRA, if you have one). Then you can close the SEP-IRA and not have to worry about pro-rata implications when you perform a back door Roth contribution via a Traditional IRA. I did all of these steps very easily with Fidelity. You can shop around for other brokerages if you like, but Vanguard doesn't allow inbound moves of money into a Solo 401k (which is why I chose Fidelity).