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I have an opportunity that would pay me $70 an hour but it would be corp to corp, which as far as I understand would mean I would need to do all my own taxes and Social Security. I live in Raleigh, NC with about 3-4 dependents. Roughly how much could I expect to be making an 80 hr pay period after taxes?

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    Does this assume you have no other income? – JohnFx Mar 9 '11 at 18:42
  • My wife does work, but does not have any benefits. – arinte Mar 10 '11 at 19:05
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There are way too many details missing to be able to give you an accurate answer, and it would be too localized in terms of time & location anyway -- the rules change every year, and your local taxes make the answer useless to other people.

Instead, here's how to figure out the answer for yourself.

Use a tax estimate calculator to get a ballpark figure. (And keep in mind that these only provide estimates, because there are still a lot of variables that are only considered when you're actually filling out your real tax return.) There are a number of calculators if you search for something like "tax estimator calculator", some are more sophisticated than others. (Fair warning: I used several of these and they told me a range of $2k - $25k worth of taxes owed for a situation like yours.)

Here's an estimator from TurboTax -- it's handy because it lets you enter business income. When I plug in $140K ($70 * 40 hours * 50 weeks) for business income in 2010, married filing jointly, no spouse income, and 4 dependents, I get $30K owed in federal taxes. (That doesn't include local taxes, any itemized deductions you might be eligible for, IRA deductions, etc. You may also be able to claim some expenses as business deductions that will reduce your taxable business income.) So you'd net $110K after taxes, or about $55/hour ($110k / 50 / 40).

Of course, you could get an answer from the calculator, and Congress could change the rules midway through the year -- you might come out better or worse, depending on the nature of the rule changes... that's why I stress that it's an estimate.

If you take the job, don't forget to make estimated tax payments!


Edit: (some additional info)

If you plan on doing this on an ongoing basis (i.e. you are going into business as a contractor for this line of work), there are some tax shelters that you can take advantage of. Most of these won't be worth doing if you are only going to be doing contract work for a short period of time (1-2 years). These may or may not all be applicable to you.

And do your research into these areas before diving in, I'm just scratching the surface in the notes below.

  • Retirement plan. You can set up an Individual 401(k) account and stash "up to" $49k tax-free (you wouldn't qualify for this much though). Or you can open a SEP IRA (which is a bit cheaper and simpler to set up), and save around $35k tax-free.
  • Health care. You don't mention if you have a spouse who works, and if you have health care through that employment. If you get a high-deductible health plan and establish a Health Savings Account, the premiums for the insurance should be deductible, and you can save up to $6150 in the HSA which is deductible. (To be clear, I think the health care premiums you pay are deductible whether you have HDHP+HSA or not, but check with your accountant first.)
  • Disability insurance. It will take you a couple of years to have a track record before you'll be able to buy it, but disability insurance premiums may be deductible. Be sure to talk to your accountant first, though, because choosing to deduct these premiums can have large consequences in the event that you need to collect on this insurance.
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In addition to taking into account your deductions, as mentioned by @bstpierre, you also need to account for vacation, and other time off such as sick days. You also need to estimate what percentage of the year you expect to be working and pro-rate your salary accordingly. For example it is not uncommon to use 40 weeks out of the year which is about 77% of the time. Also check to see if you would be eligible for unemployment for the times you are not working. I suspect not. But in any case, you might want to use worst case scenario figures to see if it is worth it, especially in this economy.

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    Another thing to watch for is a capped-hour contract with a government agency or large company. If you have to work extended hours, it's possible to get in a situation where you run out of hours in the contract and end up getting kicked out at an inopportune time (usually at the end of a fiscal year when issuing new contracts is difficult) – duffbeer703 Mar 11 '11 at 3:25
  • @duffbeer703 - if you've hit your cap on hours, then shouldn't that mean you've earned "as much as you could" for the year .. even if it's only been in 8 months? – warren Mar 24 '11 at 16:02
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Does your spouse work? That's one factor that can put your income into a higher bracket. The one difference to note is you will pay 2x the social security portion, so even though not "federal" tax, its right off the top nearly 13%. I'm not familiar with your states tax. It's really worth dropping the $75 on a copy of the software and running your own exact numbers.

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If it's just you working, I'd use a ballpark figure of 35% owed - it may be a little high or low, but it's a safe margin to keep set aside for paying your liabilities at the end of the year.

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