Many of the professionals Luma represents become independent consultants. As an independent consultant you become a business owner opening up new financial opportunities. You recover control of your earned income and can manage your finances at a new level.
1099 vs. W-2
The biggest shift is realized in how your income taxes are paid.
Most of us are used to our employers withholding and paying our income, Social Security and Medicare (FICA) taxes along with withholding funds for things like our insurance premium payments. At the end of the year, we get a W2 statement reflecting how much money we actually took home and how much money was paid in state and federal taxes.
When you are paid as a 1099 independent consultant, you are paid 100% of your earnings and assume responsibility for paying your taxes and insurance which you can reduce through appropriate and legal ways. At the end of the year, you recieve 1099 statement (rather than a W2) which is used to complete your taxes.
As a W2 is to an employee, a 1099 is to an independent consultant. There is nothing too tricky about that. It’s just a different form.
Here’s were it gets fun. As an independent consultant, many of the expenses you pay for today with funds that have already been taxed, become legitimate business expenses. Your buying power goes up and your taxable income goes down. There is a bit of record keeping involved but expect to see an unexpected raise.
For a simple explanation regarding the benefits of owning your own business, we recommend getting a copy of the book, “Lower Your Taxes – Big Time!”
We are also happy to connect serious candidates with a trusted accountant who is happy to meet with you for a free consultation. While all of this may seem intimidating at first, you will be surprised with the ease and value of working as an independent consultant.
Contact us for more information.