I am looking for some big pros and cons to taking a position as an Independent Contractor vs Employee.
Mainly the tax implications and what would be appropriate to ask for in compensation between the two.
- Tax implications? To be brief, as an employee your employer pays half of your self employment tax, as an IC you pay all of it though only on the net taxable amount (after your business deductions and a deduction for half of your SE tax).
- Different in compensation as an EE vs IC, generally about 2-3%. So, if you get offered 30% as an employee, the employer could afford to pay you 32-33% as an IC and have about the same cash outlay.
- In terms of other pros\cons of IC over EE:
- You choose the business deductions you have and they'll be 100% deductible (assuming their all legit). Though with a flexible employer you can get the same deduction benefit from them at no cost to them PLUS they get to save payroll taxes.
- The possibility of a retirement plan JUST for you (though you need to be careful if your deemed to "share" employees).
- You choose your entity.
- Costs associated with creating an entity and maintaining it.
- As an IC you won't be eligible for employers benefits for their employee.
- And there are many more....too much to write and all I can think of off the top of my head.