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Financial Planning / Tax Strategies
|Subject: Self employment tax||Date: 10/12/2013 4:47 PM|
|Author: WotPeed||Number: 119292 of 121789|
Short version: is there a rule of thumb for calculating what my self employment tax would be on income earned this year as compared to if that income were earned as a W-2 wage?
Long version: I switched jobs this year. For the first few months I was working as a regular W-2 wage earner at my old job. I left that job and started working part-time (hourly rate) as an independent contractor for a start-up company for a few months. Eventually that start-up took me on full time. We agreed on a salary but they asked if I could continue to get paid (at the new rate) as a contractor for a while. I'm going to be the first official employee of this start-up and they are taking their time getting things like health care and various HR stuff in place so they're not ready for actual employees yet.
I agreed to this arrangement on the conditions that they pay for my COBRA health insurance through my old job and that they also covered any difference in taxes I would have to pay by being classified as a contractor rather than an employee. They were fine with those conditions.
This arrangement has been in place for the last couple of months (started full time in August). How do I figure what the difference in taxes would be earning the same amount as a contractor vs an employee? Is it possible to do without preparing complete returns under both circumstances? I assume it's further complicated by the fact that the money they're giving me to cover my COBRA insurance will be considered income as well, won't it?
Thanks for any advice.
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