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Author: WotPeed Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Self employment tax Date: 10/12/2013 4:47 PM
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Greetings,

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.

Wot
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