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Decath and Saydiver,

Again, thanks for the suggestions for my calculations.

I've plugged the numbers into Turbotax 2004 estimator and what I found was, unless I can fudge the Schedule C with business expenses beyond just the 401(k) contributions, even contributing $41K would leave us paying MORE in taxes than going the W2 route. I was pretty amazed. Even though taxable income would be $18,500 lower, total taxes would be $3,675 higher. This assumes we even could make $41K in contributions each year, cash flow-wise.

Now, granted, as time goes on, we will end up with taxable investments that could swing the pendulum, since the opportunity of putting that money into tax deferred would reduce the tax bite from interest/gains taxes. But, we don't know how long this gig will even last.

So, at this point, I think we'll go the W2 route and keep our eye on it.

Again, thanks for your help. It really clarified my thinking on this and now I won't be wondering if we made the right decision.

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