Currently, I make about $96000 a year as a W2 employee in the USA. Suppose I were to make the same amount through working on sites like ODesk.com at home. In other words, I would be an independent contractor instead. I believe the amount of business expenses would be minimal unless I needed to buy licenses for certain types of software. So for now assume that business expenses would basically be $0 although I may probably be eligible for some business deductions. Based on my research so far, it looks like the only differences in taxes would be:
- I pay about 7% more in total taxes since I now have to pay the other half of the federal payroll taxes.
- I know this isn't exactly related to taxes, but I now have to worry about finding my own health care and there are no more 401K contributions from an employer.
- I have to pay the taxes quarterly instead of yearly now.
Does that seem right? Are there other costs that I am not taking into consideration here? The 3 things above seem to be the major things to worry about if I decide to choose this route.