Convince my employer to treat me as a 1099 contractor to defer more income?

[NESailor]

Hello everyone!

I have to admit that I'm actually an accountant.  However, I've been doing corporate accounting for a long time so I'm not so well versed in personal/business income tax (we outsource that stuff).

I'm wondering if this idea has any economic merit: 

Convince my employer to treat me as an independent contractor so that I can set up a SEP IRA and defer more than the usual 18K + 5.5K that's available to W2 employees.  I know that authorities generally have issues with employers abusing contractors by not providing benefits and not paying employer FICA taxes...but this would be the opposite, right?  I'm prepared to forego the benefits and absorb the employer portion of FICA taxes as the tax benefit of deferring 53K could be worth more.

Also - if I were to buy health insurance for my family - could that be a business expense?  If I set myself up as an employee of my own business?  There's a possibility I wouldn't need this anyway as I'd get coverage via my wife's employer but still worth asking.

I know there are legal considerations beyond the tax questions but I don't actually know exactly what they are (nature of work/who makes decisions, etc. right?).

Would anyone like to chime in on this idea?

[CowboyAndIndian]

Will they be able to pay you a higher amount than your present salary as a contractor rate?

You would need extra money to pay for items which are hidden within your salary, but you would need to pay for as a 1099 consultant

• 7.5% company match for Social Sec
• Healthcare (If your spouse works and has healthcare, you can bank this)
• Vacation. Company pays you even when you are on vacation
• Extra Accountant fees (in my case $1k for LLC filing)
• E&OE insurance

Come up with the number and add 10% extra for risk (easy to get rid of consultant, not so easy for employee).

Do you think your company would go for that?

But there are some dis-advantages of being a consultant.

• As a consultant/contractor, you are considered the hired help. The shitty jobs are put on your table.
• When there is financial distress in the company, your hours (and pay) are cut. Employees do not get that.
• No package in the case of layoff for a 1099 consultant.

But there are also advantages of being a consultant.

• You are not involved in the office politics.
• You can put aside unto $53k with a individual 401k
• You can write off commute (your house is your office)
• You can write off computers/office supplies and restaurant bills
• healthcare can be a company expense if you treat all employees the same. Not an issue if your LLC has just one employee

[randymarsh]

The biggest issue is that neither you nor your employer can just decide one day to move you to 1099. It sounds like your current job means you come into an office everyday at a time dictated by your employer, use company equipment to do your job, have a set yearly salary, and have no other clients.  While there are some gray areas to 1099 to W2, it seems clear that in the current incarnation of your job you are an employee.

All that said, *if* you could convince them to do 1099, I don't think anyone would actually care. The IRS only seems to get involved in 1099 disputes when an employee says they're misclassified. But if I was the employer I would not do this as in a year or 2 there's nothing to stop you from saying I was trying to screw you.