1099 and W2 income

[B L I S S]

Hey all,

Need that exceptional knowledge that you all hold. I recently quit my job and they've asked me to be an independent contractor while I'm at my new job.

Does anyone know anything about this at all? Even the basics? I've never considered the possibility of having a regular full time job but also doing contract work. Are there legal barriers I need to know about? What do I need to know?

[secondcor521]

A few basic things:

Make sure your new employer is comfortable with the arrangement.  If the old and new employers are in the same industry, there could be concern about conflict of interest.  Depending on how much you trust new employer, you may want to get their OK in writing from an officer or manager.

If you're a contractor with your old company, then you will have to pay both halves of SS and Medicare taxes.  Old company should raise your hourly rate to compensate for this.

Old company may not withhold any income taxes from your pay.  If so, you'll need to manage things so you don't get hit with underpayment penalties.

[Bracken_Joy]

https://www.viewthenumbers.com/w2-vs-1099 If it does end up being kosher, be sure they up your pay enough.

[EnjoyIt]

There are significant benefits to independent contractor work especially when you have W2 income coming in providing you health insurance benefits.  This works out even better if your total income is above the social security threshold. 

In addition you get significant tax savings being an independent contractor.  You can deduct lots of business expenses such as a home office, car expenses, necessary electronics like computers and cell phones.  Plus you have significant tax deferred options like an individual 401k with a cap of $56k in 2019.  And you get the new Trump 199a business deduction as well.

[B L I S S]

Amazing tips, thanks. I'll check out that website linked

[PDXTabs]

Also, you can use a SEP IRA for your 1099 income on top of any 401k from your W2 job.