Ought to I Take a 1099 Job or is it too Dangerous? Take the Quiz!

Whether or not you end up all of the sudden unemployed or simply contemplating a profession change, the query “Ought to I take a 1099 job?” could be a tough one.

I nonetheless bear in mind taking my eight-year side-hustle full-time and questioning: “ought to I actually be doing this?”

No extra W-2s for me. I had formally entered the world of “1099 employees.”

Having survived myself, I can safely provide you with this recommendation: calm down. It’s not as scary as you may suppose.

Nonetheless, it’s value contemplating all of your choices earlier than you are taking a 1099 job to make sure you’re making your best option. You could not even know what a 1099 job is. Or it’s possible you’ll perceive what it’s, however nonetheless aren’t certain if it’s a greater possibility than conventional employment.

So on this article, I’d prefer to shed some mild on the largest causes for and towards taking a 1099 job as a substitute of a conventional worker place (generally known as W-2).

Quick Reply: Ought to You Take a 1099 Job?

In brief, taking a 1099 job is a good way to construct up considered one of two issues: (1) facet income along with your day job or (2) income on your personal small enterprise.

In the event you’re pursuing a side-hustle or need to develop your personal enterprise, then taking a 1099 job is a good concept.

If not, it’s possible you’ll need to rethink and give attention to discovering conventional W-2 employment.

Let’s dive a bit deeper into what it means to take a 1099 job and whether or not or not it’s a good match on your profession objectives and work fashion.

To begin, let’s discover some frequent floor round what precisely the variations are between a 1099 job and extra conventional work.

What precisely is a 1099 Job vs. a Conventional Worker?

If you take a 1099 job, you’re basically agreeing to be paid as a freelancer or contractor, as a substitute of as an worker.

SponsoredGrow to be a sponsor

The time period “1099 job” comes from U.S. tax code. In reality, the 1099 type is just a U.S. tax type primarily used to report earnings earned by people who are usually not workers, similar to impartial contractors, freelancers, and self-employed people.

In actuality, there are round 21 totally different sorts of 1099s. However for simplicity, the 1099 kinds that may affect you essentially the most are 1099-NEC and 1099-MISC.

Whereas we don’t must dive deep into the meanings of those kinds, it’s simply essential to know that these tax kinds report the earnings you’ve obtained from companies outdoors of conventional employment.

The place a full-time worker will obtain a W-2 type on the finish of the tax 12 months, a freelancer or impartial contractor could obtain a 1099 type of some sort to report their earnings.

Professionals vs Cons of Taking a 1099 Job

There are many benefits to taking a 1099 job—and some downsides value contemplating.

First, the optimistic:

Professionals of taking a 1099 Job

1. Flexibility to select initiatives you take pleasure in

Whereas a conventional W-2 worker basically has to do no matter their boss tells them (irrespective of how a lot they hate their boss), taking a 1099 job means you will have the selection to just accept or flip down a mission.

SponsoredGrow to be a sponsor

So if the mission or the consumer simply isn’t a match, you possibly can politely flip them down and anticipate one thing higher to come back alongside.

2. Freedom to work when and the place you need

3. Success in working for your self

If you’re a 1099 employee, you’re sometimes your personal boss. And whereas working for your self isn’t at all times excellent, it has main benefits.

For instance: in the event you work at a conventional job and do one thing that brings in loads of income to your employer’s firm, it’s possible you’ll not see a lot (if any) of a pay enhance.

However whenever you’re operating your personal enterprise, issues are totally different. When your corporation does higher financially, YOU do higher.

SponsoredGrow to be a sponsor

Within the first three years after leaving my W-2 job and turning into a 1099 employee, I elevated my earnings by almost 5 instances. Present me a day job the place you are able to do that in only a few years.

Not solely that, however you get to benefit from the achievement of rising one thing by yourself—as a substitute of counting on an employer for a paycheck.

Cons of taking a 1099 Job

I don’t need to paint the whole lot as a picture-perfect situation in the event you take a 1099 job, although.

The reality is, there may be some downsides to being your personal boss. Listed here are a couple of value considering by way of earlier than you are taking any new jobs:

1. Every part depends on you to succeed

Sometimes, whenever you’re a 1099 employee, the “buck stops” with you. That means, the whole lot in your corporation depends on you to succeed.

That’s the opposite factor about 1099 work: you’re basically beginning a enterprise. Even in the event you’re simply taking a 1099 job on the facet. In the event you make greater than $600 outdoors of your conventional employment, you’re taxed on it—as extra enterprise earnings.

Meaning in the event you’re sick for per week, there’s nobody there choosing up the slack. It’s an enormous dedication. And though you possibly can graduate shortly from freelancer to founder, there might be a time frame the place it’s all on YOU.

2. It might be much less safe

Some advocates of “common” day jobs declare that taking up a 1099 job could also be much less safe than a conventional job.

For instance, it’s possible you’ll endure from a feast-famine situation the place you will have plenty of work one month and hardly any the following.

You possibly can have a consumer who ghosts you and turns into utterly unresponsive. Even failing to pay their invoices.

Or your word-of-mouth referrals might dry up utterly, leaving you with none new enterprise in any respect.

Observe: One in every of my favourite authors, Chris Guillebeau would disagree right here (and so do I). He wrote: “What’s dangerous? Whether or not you’re employed a ‘actual job’ or strike out by yourself, counting on another person is dangerous.”

3. Lack of conventional advantages

In the event you’re used to working at a conventional job the place you not solely obtain a paycheck, but in addition produce other advantages, then taking a 1099 job could be a actual adjustment.

Typically, employers will supply an employer-matched 401K, healthcare subsidies, and well being financial savings accounts (HSA). To not point out paid day without work (PTO) and—in some instances—premium perks like a cellphone, a car, or sizable bonuses.

If you work as a 1099 employee, many of those advantages go away.

That’s to not say there aren’t choices for 1099 employees. It’s only a bit extra difficult.

Contractors and freelancers can get a self-employed retirement plan and in addition have entry to medical health insurance in less-traditional methods.

Once I first left the world of conventional employment, I used to be terrified about shedding advantages like healthcare. But it surely seems, there are many comparable choices for freelancers, contractors, and the self-employed.

How 1099 Taxes Work

In the event you begin taking extra 1099 jobs, you’re going to see a reasonably important shift in the way you pay your taxes.

For starters (like I discussed earlier than), you’ll not obtain a W-2 type (except you’re maintaining your day job whereas constructing your side-hustle). As an alternative, you’ll obtain 1099 kinds for all of the contractor jobs you settle for (over $600) through the 12 months.

You’ll then use these kinds to calculate your tax legal responsibility.

Tax legal guidelines may be complicated and I positively suggest consulting with a tax skilled (I’m not one).

To get you began, listed below are a couple of modifications you possibly can count on:

You do Your Personal Tax Withholding

As a conventional worker, your employer often withholds taxes out of your paycheck and pays them for you.

For instance, earnings taxes, Social Safety taxes, and Medicare taxes are often taken out of your paycheck earlier than you obtain it.

However as a 1099 employee, you’re chargeable for setting apart and paying these taxes your self.

You’ll must estimate your tax legal responsibility and make quarterly estimated tax funds to the IRS all year long.

It’s easy. However not computerized like it’s whenever you work for another person.

You Need to Pay Self-Employment Taxes

If you tackle 1099 jobs, you’re technically self-employed. Which suggests you’re chargeable for paying self-employment taxes along with your personal private taxes.

That’s as a result of, when you find yourself your personal boss, you need to pay each the employer and worker parts of Social Safety and Medicare taxes.

This tax is along with your common earnings tax and is called Self-Employment Tax.

There are methods, in fact, to avoid wasting on self-employment tax. For instance, I signed up for Collective which helped me convert my sole-proprietorship to an LLC—and within the course of saves me round $10,000 a 12 months.

You get to take extra tax deductions

On the plus facet, you’ll have extra alternatives for tax deductions in comparison with conventional workers.

You’ll be able to deduct eligible business-related bills like workplace provides, tools, journey bills, and a portion of your property workplace bills.

These deductions may help offset your taxable earnings which, in some instances, means you really get to pay much less in taxes than in the event you had a conventional job.

I additionally suggest you assessment the finest tax deductions for freelancers and self-employed.

Secret Weapon: The QBI Deduction

I’ve saved the very best for final. In the event you’re a 1099 employee, you will have entry to one thing known as the “QBI Deduction.”

QBI stands for “Certified Enterprise Revenue” and, briefly, it’s a tax profit that helps freelancers and 1099 employees who run their companies as people, partnerships, S companies, or LLCs.

The QBI Deduction can scale back the sum of money you need to pay in taxes and supply some monetary aid.

I recommend you communicate with my pals at Collective about it. They set me up and it’s been unimaginable for my enterprise income.

The Verdict: Ought to You Take a 1099 Job?

After the whole lot I’ve shared with you right now, I hope you’re a bit nearer to deciding whether or not taking a 1099 job is best for you.

The reality is: it’s not maybe as large of a deal as you may suppose. Taking a 1099 job doesn’t preclude you from taking a conventional job nor does it make your life overly difficult.

However I get it: it’s nonetheless an essential determination. And one you need to be well-educated about.

If in case you have any extra questions on taking up a 1099 job, I’d love to assist over in our fb group.

In the event you’re able to take the leap, then congrats and good luck! I want you the easiest as you discover a work-life with extra freedom, flexibility, and achievement.