Today TaxMama hears from Al from Monsey, NY wants to know, “If I am married and filing jointly; as a PC Programmer, should I get paid as an employee, with a W-2 or should I become a consultant and just freelance?”
It’s a question my clients and readers ask me all the time.
And it’s the subject of my introduction letter to Small Business Taxes Made Easy.
In essence, deciding whether to be an employee or a business will depend on your ability to run a business, keep records, submit invoices on time, stay in compliance, pay estimated taxes, track expenses….
vs simply getting a paycheck and letting your boss do all the work.
A lot will depend on how much income you will be earning, how many clients you will have, and whether or not you ought to think about incorporating…and stuff (that’s a technical term).
I suggest you run the numbers on what you’d have to charge in order to freelance. Remember, you’ll have to pay all the employer’s share of your FICA and Medicare yourself, you’ll give up all the job benefits, like paid vacation days, sick days, health insurance etc.) Sometimes, the additional hourly rate you’d need to charge to make up for all that really outweighs the tax benefits.
Read this article on the TaxMama site for some of the other considerations.
Then, gather your information and sit down with a good local Tax Pro who can really help you think this through.
And I do hope you make the best decision for your circumstance.
And, remember, you’ll find answers about lots of information about businesses and other tax issues, free. Where? Where else? At TaxMama.com
- Ask TaxMama :: Where taxes are fun and answers are free
- TaxMama’s Articles :: The Freelance/Self-Employed Myth and Reality
- Small Business Taxes Made Easy :: Read the Introduction letter