Hacker News new | ask | show | jobs
by hermitdev 1516 days ago
> 1099 is definitely the way to go for as long as you can - people still get social security credit.

The "danger" with a 1099 isn't that you don't get social security credit, it's that there's no withholding, so the recipient has to pay all of the taxes after the fact (instead of getting a refund come tax time like most? many?).

It shouldn't be a problem for someone used to this and plan/save accordingly, but it's easy for someone new to contracting to fall into a trap of "OMG, look at all this money!! I'm going to go buy something expensive..." and spend everything, without considering their tax liability down the road.
2 comments
driverdan 1516 days ago
> The "danger" with a 1099 isn't that you don't get social security credit

What do you mean? You still pay in but you have to pay 100% yourself instead of having the company pay half.

link
Johnny555 1516 days ago
Why was this post downvoted? That's my understanding too, the "self employment" tax replaces what the employer would have paid. Is this not the case?
link
orangepurple 1516 days ago
It is the case. If you are being paid as 1099 you need to ask for more money because of this shift in tax burden.
link
Johnny555 1516 days ago
Yeah, I assumed that was common knowledge, and is one of the reasons 1099 hourly pay is typically greater than W-2 hourly pay. (other reasons include that you don't typically get PTO, health insurance, retirement account, etc)
link
bombcar 1516 days ago
It's common knowledge to those who have been burned by it.

Many haven't yet, and many people can get "tricked" into it - there's a reason the government has to stomp on companies that try to 1099 everyone.

link
Johnny555 1516 days ago
Doesn't that apply to all sorts of employee compensation? ISO's vs RSU's, employee stock purchase/matching programs, PTO options ("unlimited PTO" in particular can be bad for the employee), health insurance options, 401k contributions.

All can have big financial impacts to employees, and employees need to understand them before they accept an offer. There's no reason to be surprised by the tax implications of 1099 vs W-2.

1099 isn't necessarily worse than W2, it opens more tax deductions for the employee, but also requires more bookeeping and the employee needs to understand what the difference is.

link
yellow_lead 1516 days ago
And they have to pay a self employment tax
link