this post was submitted on 15 Oct 2023
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You also have to pay the 15% (of net) self employment tax that your employer normally pays when you're a W-2. That effectively means you're paying double the tax rate of a W-2 employee.
Oh and you can deduct your "business expenses" to try to reduce your tax burden, but you shouldn't even try to itemize unless your yearly expenses are higher than the standard deduction ($13,850 for single / $27,700 for joint / $20,800 for HoH). Itemizing doesn't add to your standard deduction, it replaces it.
Source: My wife is a contractor and taxes for us are a whole fucking ordeal. We're just glad I have a W-2 job thar offers benefits and the option to pay a lot more than I need to in tax withholding.
Just in case you aren't aware, an LLC has the option to be taxed as an S-Corp which can be beneficial tax-wise depending on her income level. There is more paperwork involved because she would have to run payroll for herself, but it can be worth it. Theoretically, your accountant would recommend this if it would be beneficial for you, so hopefully, this isn't news to you guys, but if so, it may be worth exploring.
No, this is not news to us - our accountant has certainly mentioned it - but there's a lot of oddities in her situation that make this a little more difficult - like the fact that she's not an actual freelancer but it's just the compensation startegy that this grant-funded project she works for was built around.
Its not impossible though, and certainly something we need to look more into. Thank you for bringing it up especially for anyone else looking at this in a similar situation.