Hello,
I am no expert regarding what I am about to ask, so please be gentle And maybe this thread belongs in the tax section, but I am not sure... :-(
I wanted to hire an independent contractor, but given the 2015 DOL and IRS rule changes, the person will have to be an employee. I am fine with that. Here are the details:
I am trying to figure out a formula to hypothetically calculate this new employee's pay, and I am struggling with addressing employment taxes. Here is an example:
I am hoping that I am over analyzing this, and somebody can provide me some useful tips and/or rules of thumbs to help me with this, because it is giving me a headache :-(
Thank you in advance!
I am no expert regarding what I am about to ask, so please be gentle And maybe this thread belongs in the tax section, but I am not sure... :-(
I wanted to hire an independent contractor, but given the 2015 DOL and IRS rule changes, the person will have to be an employee. I am fine with that. Here are the details:
- The new employee will be paid for each report written.
- I do not want to pay the new employee a salary, because if they are not productive, and given the size of my business (very small), it could bankrupt me.
- Furthermore, I would prefer the employee be "incentivized" to be more productive. If they are happy with their current earnings, then I am happy for them. If they want to earn more, then they can earn more. In this line of work, I think it is better for the employee to have control over their own destiny, but that is just me.
I am trying to figure out a formula to hypothetically calculate this new employee's pay, and I am struggling with addressing employment taxes. Here is an example:
- Employee writes 2 reports in a pay period, which generates $1,000 in revenue.
- I need to subtract fixed overhead expenses (e.g., additional office space for them, etc.)
- I need to subtract variable overhead expenses, like planned office expenses, and profit margin for the business, etc.
- Let's say after these subtractions, $700 is left from revenue earned.
- I know that I need to withhold 6.25% from the employee's earnings for social security, and I also need to set aside a 6.25% match for the employee, since I am an employer (I know there are other taxes, but I am trying to keep it simple).
I am hoping that I am over analyzing this, and somebody can provide me some useful tips and/or rules of thumbs to help me with this, because it is giving me a headache :-(
Thank you in advance!