[JOS] $75k salary. I can convert to corp-2-corp. Any downside?
As seen on the Joel on Software forum (click HERE for the original post):
I am getting paid $75k (on a W2) for 20 hours a week.
W2 means they are spending $6k for FICA. (And same w/ me)
I have opted out of HMO coverage. (getting it elsewhere)They have agreed to convert me to consultant.
Any downside for me?
They are spending $75k + $6k FICA for a total of $81kWhat should the annual consulting pay be?
Leave it at $75k?Will the extra deductions offset the extra FICA?
Note: I will not W2 myself (from the S-corp) the entire $75k income. (Note: I need to pay both sides of FICA, so I would W2 maybe $20k)
First of all, let me say that $75k for 20 hours a week is a great job. Good thing you posted as anonymous, otherwise your employer would be receiving lots of resumes (including mine *cough*).
I originally wrote a post (Calculating Equivalent Corp-2-Corp Rate) on this very question. Convert your rate to hourly rate, and then crunch the numbers. This should give you a MINIMUM rate. If you are offered at or below this rate, you should insist on W2.
As I said in the blog post, your costs will definitely be more.
Keep in mind that you will have additional expenses:
- incorporation filing fee
- yearly franchise or state corporate tax
- worker's compensation
- general business liability insurance
If you outsource your tax preparation to an accountant, you will also have to pay out approximately $500 for the 1120S and Schedule K each year.
Good luck with your negotiations.
