[genecomptuergeek]

I have been offered a job in another state (Georgia) and I am attempting to figure out the taxes I am going to have to pay since they are offering me a job as a 1099 contractor and not as an employee. They are asking me about rates if they offer the job to me as a 1099 contractor. I make $60k per year now and I have medical and dental insurance for my family with my current employer so I know I have to consider the costs of those outside of my current employer but my main concern is taxes (state and federal) for this employment. I will have to pay federal taxes (estimated and paid each quarter) but what about Georgia taxes if I don't move and just travel for work do I have to pay Georgia state taxes, what about self employment taxes and anything else I am missing. I think it would be foolish to leave a job with benefits without a significant pay increase so what do I need to make gross as a 1099 contractor "break even" at $60k per year? Knowing this will help me to determine a rate that will give me the pay increase necessary to entice me to change my employment.

[ebaines]

The taxes you will owe GA are the same regardless of whether you are a 1099 or W2 employee. And yes - you have to pay GA taxes on money you earn in GA, even if you don't live in the state.

As for federal taxes - yes you have to keep up with making estimated payments each quarter, but the amount you pay is essentially the same as would be withheld if you were a W2 employee. However, you also have to pay social security tax and medicare, and the bad news is that the amount you pay as a self-employed worker is twice what employees pay. So your SS tax goes from 6.45% to 12.9% of pay. You already know about the lost benefits - not only medical but also perhaps dental and life insurance. You should also consider what happens to vacation and holiday pay - if your current employer gives you 2 weeks vacation plus 7 paid holidays that's worth about 8% of your salary (I am assuming that as a 1099 employee you would not get paid vacation or holidays). And if your current employer contributes to a 401(k) retirement plan for you, you'll be losing that. And rather than having an annual performance review and salary increase, any increase will have to be via a contract, and so you may not be able to renegotiate it as often. In this economy where no one's getting raises that may not be an immediate concern, but keep it in mind.

On the plus side, as a 1099 contractor you can deduct costs of your business from your income taxes. So things like equipment, software, etc may be deductible.

Bottom line: if you currently make $60K I would suggest that you need to make at least $70K to make it worthwhile. But more importantly - in making your decision consider whether the work will be better than what you're currently doing, the company is secure, and the exerience will help your careeer.

[AtlantaTaxExpert]

To determine the Georgia tax bill, you make the required adjustments for personal exemption ($2,500 for you and your wife) and $3,000 for each child.

After those adjustments, the tax on the FIRST $20,000 is $920.

For every dollar over $20,000, you pay a flat 6%.