Independent contractor - just me

Posted: Jun 13, 2013

I was thinking of applying for an IC job until I saw this (and much more, but this did it for me). If you have been offered an independent contractor position it is very important that you calculate the ultimate cost to you as a taxpayer to see if the salary being offered is worth the time and effort. For example, if you are being offered $15 an hour as an independent contractor and $12 an hour as a payroll employee, you may initially be tempted by the fact that your "take home" pay will be $15 an hour with the first offer and probably be less than $10 an hour (based on average state and federal tax withholdings) with the second offer. However, if you have little to no business expenses to write off then your "take home" with the first offer after paying income and self employment tax drops to only $9.75 an hour and brings with it the additional stress of correctly reporting the self employment income on a schedule C. All in all, the tax consequences of being paid as an independent contractor can really add up. It is important that anyone who is considering accepting a position as an independent contractor calculate the tax consequence to see if the income offered is worth the cost to the taxpayer. If in doubt, speak to a tax professional (H&R Block tax professionals, as well as many others, will offer free tax advice) regarding the tax consequences for your unique tax situation.