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03 - Accounting & Taxes Accounting Help & Tax Strategies

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Old 04-15-2014, 07:46 PM
Rikaelus Rikaelus is offline
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Default Flipped from 1099 to W2; less gross, more money?

This question comes from the employee side but it relates to how the employer handles the payment of social security and medicare taxes.

I was brought on as a 1099 contractor, having to pay the full 15% Self-Employment tax, myself. I knew once my employer flipped me to a W2 they'd then become responsible for 7.5% of it. The strange thing is that, as it worked out, I actually had my gross salary reduced by some $6k/year, but I'm actually netting $300 more every month.

Now when I run the numbers this makes sense from my side. I went from paying 15% on $78k to paying 7.5% (and all other normal taxes) on only $72k. The difference is a net gain.

But I just can't get over the fact that it would work out like this; that the IRS wouldn't have accounted for this in some way. They're now getting less tax revenue out of somebody whose now earning more money.

Can anyone vouch for the validity of this scenario? I'm just so paranoid my employer might get fined for doing things wrong, or I'll end up owing come filing time...

Thanks in advance
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