Author Topic: W2 vs Corp to Corp for contract work  (Read 1522 times)

MJseast

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W2 vs Corp to Corp for contract work
« on: December 14, 2017, 11:18:55 AM »
Hi all,
I'm searching for contract work right now and a few times the contracting agency has asked me whether I want to W-2 or Corp to Corp. I do have a single-member LLC (WA state) that have used for 1099 work in the past so C2C is an option for me. I'm trying to figure out the pros/cons of each. I'm googling and getting confused on what I'm reading, so if anyone has any real-life experience with this choice, I'd love to hear it.

For the latest proposal, they are offering a choice of $67/hr on W2 (no benefits) vs. $77/hr C2C; 6-month contract. I *think* this is about equal considering the taxes I'll have to pay myself. I understand I have to deal with payroll, which would be a pain, but I think then I could start a Solo 401K, which would be great since the majority of this income was planned for savings anyway.

Any thoughts on this?

dandarc

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Re: W2 vs Corp to Corp for contract work
« Reply #1 on: December 14, 2017, 11:28:38 AM »
Not sure of any state or local tax issues, but the main thing on federal is going to be the other half of self employment tax.  That works out to under $5.50 / hr (7.65% of 92.35% of your C2C amount), so you're still a bit ahead there.  That's based on working 6 months, and therefore staying under FICA tax limits.  If you have other income, or this contract renews,  you'll likely go over the Social Security wage base, so that is something to consider as well.

Is your LLC taxed as an S-Corp or Proprietor?

MJseast

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Re: W2 vs Corp to Corp for contract work
« Reply #2 on: December 14, 2017, 11:50:13 AM »
Thanks dandarc! I do have other income W2 income (~$65k/yr gross, with health insurance but no 401K). My LLC is taxed as a Proprietor right now.
It seems like because I plan to save the majority of this income, it may make sense to do C2C and open a Solo401k since right now I only save $5500/yr in an IRA.

dandarc

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Re: W2 vs Corp to Corp for contract work
« Reply #3 on: December 14, 2017, 12:00:26 PM »
Yep - that's a good approach.  Proprietor should maximize what you can put into the SoloK, but also will max what you pay in self employment tax.

One thing - maybe you could ask for another few bucks on the C2C rate.  If they're offering you specific rates, maybe you've got some negotiating room.