6 ms·

Contractors have to pay more in taxes, not less, since they owe both sides of social security and Medicare.

tigershark 7y ago
I guess it depends from the country and the type of contractor. In UK, with a limited company, you pay less taxes (at least until next April). If you are under an umbrella company you will pay more taxes because you’ll be paying all the taxes of a normal employee plus the taxes of the employer. No idea if it is different in US and other countries honestly...
- yardstick 7y ago
  What happens next April?
  - tigershark 7y ago
    It’s a very good question, and a long story. As far as I know still no one has a certain answer. The back story is that in April 2017, if I remember correctly, all the contractors that worked for public companies were forced to be under the IR35 rule. This rule, in short, tells that the contractors are equiparable to permanent employees. So they had to pay taxes as permanent employees, without the perks, like paid holidays, sick days and so on. This caused a quite massive loss of public contractors, understandably. From April next year they are implementing the same schema in the private sector, with the difference that it will be up to the employer to declare who is inside IR35 and who is not. The mainstream theory is that employers will start putting everyone under IR35 to avoid problems with HMRC. Even if this won’t be the case at the beginning, after the first couple of high visibility cases in which hmrc punishes the employers for some wrong IR35 classification, all the others would want to avoid the risk and headaches and will classify everyone inside IR35. We’ll see next year how it turns out, but I’m not very optimistic. Luckily for now I’m shielded, but I’m paying an eye watering amount of taxes...
greenyoda 7y ago
But if you're self-employed (or operate a business that's a sole proprietorship) you can deduct your expenses (equipment, rent on your home office, etc.) from your taxable income. In the U.S., you attach "Schedule C" to your federal tax return to do this: https://www.irs.gov/forms-pubs/about-schedule-c-form-1040 https://www.irs.gov/forms-pubs/about-schedule-c-form-1040

I guess it depends from the country and the type of contractor. In UK, with a limited company, you pay less taxes (at least until next April). If you are under an umbrella company you will pay more taxes because you’ll be paying all the taxes of a normal employee plus the taxes of the employer. No idea if it is different in US and other countries honestly...

yardstick 7y ago
What happens next April?
- tigershark 7y ago
  It’s a very good question, and a long story. As far as I know still no one has a certain answer. The back story is that in April 2017, if I remember correctly, all the contractors that worked for public companies were forced to be under the IR35 rule. This rule, in short, tells that the contractors are equiparable to permanent employees. So they had to pay taxes as permanent employees, without the perks, like paid holidays, sick days and so on. This caused a quite massive loss of public contractors, understandably. From April next year they are implementing the same schema in the private sector, with the difference that it will be up to the employer to declare who is inside IR35 and who is not. The mainstream theory is that employers will start putting everyone under IR35 to avoid problems with HMRC. Even if this won’t be the case at the beginning, after the first couple of high visibility cases in which hmrc punishes the employers for some wrong IR35 classification, all the others would want to avoid the risk and headaches and will classify everyone inside IR35. We’ll see next year how it turns out, but I’m not very optimistic. Luckily for now I’m shielded, but I’m paying an eye watering amount of taxes...

greenyoda 7y ago

But if you're self-employed (or operate a business that's a sole proprietorship) you can deduct your expenses (equipment, rent on your home office, etc.) from your taxable income. In the U.S., you attach "Schedule C" to your federal tax return to do this: https://www.irs.gov/forms-pubs/about-schedule-c-form-1040 https://www.irs.gov/forms-pubs/about-schedule-c-form-1040