The Benefits Of Working As A Consultant
Topics: consultant, independent consultant, independent consultant and taxes, tax advice for consultants
Low Taxes Are Paid By Agency-Employed Consultants
Doesn’t “low taxes!” grab your attention? American workers are subject to two types taxes - one of them is federal income tax and the other is F.I.C.A.
Federal Income Tax
This tax applies to everyone, regardless of whether it is being withheld by the employer or not. It is paid annually. Simply put, independent consultants who work for themselves and who file I.R.S Form-1099 are all subject to the same tax bracket as their W-2 consultant counterparts. Independent consultants have to save enough around the year to cover their annual Federal Income tax bills. Sometimes independent consultants also have to pay State and local income taxes, as these taxes are applicable in many states.
Independent consultants, as well as agency consultants, pay the same amount of Federal Income Tax if their gross yearly earnings are the same, but it is paid differently.
F.I.C.A
This tax is mainly paid each period to fund Social Security and Medicare - it is applicable to all workers. The rate on this tax is 15.3%.
Agency employed consultants pay 7.65% of their taxable income, whereas independent consultants pay twice that amount. This means that an independent consultant pays an additional $4,000 more in tax than their counterpart who works through an agency.
Agency Employed Consultant Benefits
Such consultants get non-wage benefits such as 401 (k) plans, health and welfare plans and even holiday pay. These benefits can be highly beneficial, financially and otherwise. Some agency consultants are also offered total compensation packages.
A consultant who is earning about $50,000 a year benefits by having paid two weeks vacation, which can be valued around $2,000. Consultants also save up to hundreds or thousands of dollars per year on federal taxes, due to company-sponsored retirement saving plans. The savings due to health and insurance benefits can be sometimes up to 15-20% of their annual health salary.
In-Depth Study
If you have some experience in the field of consultancy, you may have wondered about non-wage benefits:
-An agency consultant who makes $50,000 probably gets five days paid vacation (or more), which is worth about $1,000 before taxes.
-401 (k) plans offer agency consultants a valuable tax shelter that will save them about $500 a year or more while paying Federal Income tax. These savings can then be converted into future investment gains.
-Medical and dental coverage is highly beneficial if an employer offers it. In addition, sometimes agencies help defray the cost of these medical benefits, thus reducing the payable taxes for employees even further.
-Fringe benefits such as life insurance, vision coverage and dependent life insurance go a long way into savings.
Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solution’s Six Sigma Online ( www.sixsigmaonline.org ) offers online six
sigma training and certification classes for lean six sigma, black belts, green belts, and yellow belts.
Previous Articles Highlighter:
How To Let The College Student Loans Pay For Your Study? (1)
How To Get College Student Loans When Your Credit History Is Not So Good Just because your credit score is less than stellar, that does not really mean that you will not be able to get the loans.
Using Affiliate Programs To Earn Extra Money From Home (2)
If they buy a product from that page, you'll be credited with that sale and earn yourself a nice commission (anywhere from 25 to 75%). The big advantage with selling affiliate products is that: you don't need a website (although it's better if you do, more on this shortly); you don't have to stock the product and ship it out to the customer; and you don't have to take orders or handle payments.
Internet Home Based Business Equipment Needed For Start Up (3)
Also, updating your business plan each year will help you stay organized and help create a sound plan to refer to when you need to. Once you have purchased your primary equipment, your budget should become more manageable.
Benefits Of Online Investing (4)
If you have yet to open an online trading account then allow me to highlight the benefits of doing so. There are people who prefer to stick with traditional brokers for a number of reasons to include lack of time and lack of knowledge about the stock market.
UK Accounting Reference Dates For Private Limited Companies (5)
Auditors report signed by the auditor unless the company is exempt from audit under the small companies exemption rules. When a small private company submits abbreviated accounts and takes advantage of the exemptions then the accounts must also contain the statutory statements as notes to the accounts advising the basis and exemptions under which the annual accounts have been prepared.
Know Your Car's Safety Features Well If You Want Very Cheap Car Insurance (6)
Not checking the safety ratings of the car as well as the components that you buy and not checking on how insurance companies rate particular cars for safety is not a wise course of action.
How To Massacre Your Credit Score (7)
Closing an account will cause your ratio to go up because closing the account drops your total available credit while not reducing the amount of credit you are using. Consumers should be very aware of the amount of debt that they have on the books.
Accounting Periods And Basis Periods For Self Employed Business (8)
The format of the accounts is the personal decision of the proprietor and can be a full set of annual accounts including profit and loss account and balance sheet including using control accounts and cash and bank records and the self assessment tax return.
What You Need To Know About The Proper Tires For Winter Driving (9)
This is because with front wheel drive vehicles, if you use rear wheels that are mismatched, you could risk losing traction ability when you are trying to brake during wintry conditions.
Interesting Information About The Culinary Arts School In Ohio (10)
Many culinary schools in Ohio will provide you with business courses like marketing, communications and management, in addition to more traditional classes focusing on baking, pastries, and catering. Courses are designed to prepare you for various food-related jobs, from beginning to managerial.
Newer Articles Highlighter:
Concepts For Green Belt Coaching (1)
As such, they find it difficult to reschedule their work duties for additional activities such as coaching. This problem is not limited to any particular type of organization, but statistical data reveals that it is more widespread in smaller organizations that often do not have additional manpower to share the workload when some employees are busy attending sessions.
Earn Extra Money Online With Email Marketing (2)
The profit comes from the multiple sales to each individual customer. The only way to facilitate this is to offer excellent value and content, and to continue following-up with them.
Traveler's Checks ... And Balances? (3)
I on the other hand - the one holding the pre-addressed postcard labels - believe in learning through total immersion in whatever place we visit. I like to learn about a place by experiencing it with all five senses.
More Information On Popular Vacation Getaways (4)
In such case a vacation getaway is the ultimate mantra of relaxation, which gives you that much needed time when you can sit back and enjoy with your entire family.
Journey From Video Cassettes To DVDs (5)
V.C.D means Video Compact Disc. V.C.Ds do not have any tape. They use a compression standard, which is called MPEG. This system is totally digital. V.C.D can store up to 800 Megabytes of data.
Thinking Statistically With Six Sigma (6)
Finding The Most Appropriate Quality Improvement Solutions After identifying the crucial components of the business process, Six Sigma professionals conduct brainstorming sessions with representatives from the staff, middle-level management, and the top management in order to seek quality improvement suggestions.
5 Tips To Learn Japanese Fast And Easy (7)
Use interactive audio course. This is very important because you get to hear conversations that are spoken in real everyday situations in modern Japanese society. You'll learn to pronounce words and phrases by repeating them in context, and then work your way right up to speaking entire sentences on cue.
Relocation Companies Make Your Move Easy (8)
Companies that are local or specialized in a certain area are a tremendously valuable resource to anyone buying a house. Most importantly, relocation services help take the stress out of moving.
Benefits Of Safety Tools In The Workplace (9)
The challenges of modern retail, shipping and receiving, mail room, food service, and manufacturing work mount every year. With retailers (for example) typically setting aside $10-30,000 for each lost time injury, those little injuries can very quickly add up.
Rings As Gifts: How Do You Choose? (10)
On the contrary, many women like to have items that they can match and combine in creative and colorful ways. However, what a lot of men don't realize about jewelry is that there is, in fact, one type of jewelry that ties all the rest together.