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Question: W2 Hourly vs. Corp-to-corp scenario

  
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Question: W2 Hourly vs. Corp-to-corp scenario ITIL Prime 01-10-2008
Posted by ITIL Prime on January 10, 2008, 9:41 am
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I am located in the US and currently have an S-Corp through which I
invoice clients for projects. I am the only person working for the S-
Corp.

One of my main projects has asked if I can become W2 Hourly. They
currently pay $65 per hour for my services via corp-to-corp payments.
They are willing to increase the W2 Hourly rate if there are
additional tax implications on my end. I'll still be collecting
invoices via my S-Corp for other projects.

* Do I need to quote a different rate to them to offset any additional
tax liabilities of W2 hourly?

* Is this a bad idea for me to do?


Posted by Paul Thomas, CPA on January 10, 2008, 10:13 am
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>
> I am located in the US and currently have an S-Corp through which I
> invoice clients for projects. I am the only person working for the S-
> Corp.
>
> One of my main projects has asked if I can become W2 Hourly. They
> currently pay $65 per hour for my services via corp-to-corp payments.
> They are willing to increase the W2 Hourly rate if there are
> additional tax implications on my end. I'll still be collecting
> invoices via my S-Corp for other projects.
>
> * Do I need to quote a different rate to them to offset any additional
> tax liabilities of W2 hourly?
>
> * Is this a bad idea for me to do?



Actually, since they are paying their half of the employment taxes (and they
may have other benefits for you being an employee) you should be getting
less than when you bill them as self-employed (even if you bill through your
company).

I trust you were doing some kind of payroll/wages from your company to
yourself, and that all payroll related taxes and forms/reports were or will
be filed.

There's no tax downside to you.

You would want to be sure that as their employee - you aren't violating some
company policy of working what would be considered "for the competition"
when you do the same work for others. And your other clients might also
want to know that you are employed by another company. I think that some
open discussion and disclosure would resolve many future issues or problems.





--
Paul A. Thomas, CPA
Athens, Georgia



Posted by ITIL Prime on January 10, 2008, 10:40 am
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On Jan 10, 10:13 am, "Paul Thomas, CPA"

> Actually, since they are paying their half of the employment taxes (and they
> may have other benefits for you being an employee) you should be getting
> less than when you bill them as self-employed (even if you bill through your
> company).
>
> I trust you were doing some kind of payroll/wages from your company to
> yourself, and that all payroll related taxes and forms/reports were or will
> be filed.
>
> There's no tax downside to you.
>
> You would want to be sure that as their employee - you aren't violating some
> company policy of working what would be considered "for the competition"
> when you do the same work for others. And your other clients might also
> want to know that you are employed by another company. I think that some
> open discussion and disclosure would resolve many future issues or problems.
>



No benefits are included (I still pay healthcare, etc). I was
concerned about the amount of deductions I currently claim for my S-
Corp (auto expenses, healthcare, etc), and if that might change by
accepting W2-hourly. I suppose it wouldn't as I will still be
collecting invoices to the S-Corp for other work. But if my only
source of income becomes the W2-hourly, will I be precluded from
deducting those expenses?

Yes, the company is fully aware that there are other ongoing projects
that would I would be billing to my S-Corp. Please excuse my
potential mis-use of terminology.

Posted by Paul Thomas, CPA on January 10, 2008, 10:57 am
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> On Jan 10, 10:13 am, "Paul Thomas, CPA"
>
>> Actually, since they are paying their half of the employment taxes (and
>> they
>> may have other benefits for you being an employee) you should be getting
>> less than when you bill them as self-employed (even if you bill through
>> your
>> company).
>>
>> I trust you were doing some kind of payroll/wages from your company to
>> yourself, and that all payroll related taxes and forms/reports were or
>> will
>> be filed.
>>
>> There's no tax downside to you.
>>
>> You would want to be sure that as their employee - you aren't violating
>> some
>> company policy of working what would be considered "for the competition"
>> when you do the same work for others. And your other clients might also
>> want to know that you are employed by another company. I think that some
>> open discussion and disclosure would resolve many future issues or
>> problems.
>>
>
>
>
> No benefits are included (I still pay healthcare, etc). I was
> concerned about the amount of deductions I currently claim for my S-
> Corp (auto expenses, healthcare, etc), and if that might change by
> accepting W2-hourly. I suppose it wouldn't as I will still be
> collecting invoices to the S-Corp for other work. But if my only
> source of income becomes the W2-hourly, will I be precluded from
> deducting those expenses?




The company can't deduct health insurance as it stands now.

Your mileage to and from that place of employment isn't "business" related,
so that is the only issue that I see.




--
Paul A. Thomas, CPA
Athens, Georgia










Posted by ITIL Prime on January 10, 2008, 12:03 pm
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On Jan 10, 10:57 am, "Paul Thomas, CPA"
>
>
>
> > On Jan 10, 10:13 am, "Paul Thomas, CPA"
>
> >> Actually, since they are paying their half of the employment taxes (and
> >> they
> >> may have other benefits for you being an employee) you should be getting
> >> less than when you bill them as self-employed (even if you bill through
> >> your
> >> company).
>
> >> I trust you were doing some kind of payroll/wages from your company to
> >> yourself, and that all payroll related taxes and forms/reports were or
> >> will
> >> be filed.
>
> >> There's no tax downside to you.
>
> >> You would want to be sure that as their employee - you aren't violating
> >> some
> >> company policy of working what would be considered "for the competition"
> >> when you do the same work for others. And your other clients might also
> >> want to know that you are employed by another company. I think that some
> >> open discussion and disclosure would resolve many future issues or
> >> problems.
>
> > No benefits are included (I still pay healthcare, etc). I was
> > concerned about the amount of deductions I currently claim for my S-
> > Corp (auto expenses, healthcare, etc), and if that might change by
> > accepting W2-hourly. I suppose it wouldn't as I will still be
> > collecting invoices to the S-Corp for other work. But if my only
> > source of income becomes the W2-hourly, will I be precluded from
> > deducting those expenses?
>
> The company can't deduct health insurance as it stands now.
>
> Your mileage to and from that place of employment isn't "business" related,
> so that is the only issue that I see.
>
> --
> Paul A. Thomas, CPA
> Athens, Georgia

Got it- thanks.

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