Independent contractors bear the burdens of paying Federal income taxes, self-employment taxes, and State taxes (ex. California). Let’s make a simple example with approx numbers. Single, 35 yo. Let’s say you make $70/hour as an independent contractor and work full time (40 hours per week, for 12 months). Your employer gives you a check each month that totals $134,400 for the full year ($70 x 40 hours per week x 4 weeks x 12 months). You would own 37% in taxes, $49,066: you would have left $85,334.
- Federal, 17.5%
- Sate of California, 3.7%
- Social security and Medicare (self-employment taxes), 15%
Now you have to subtract also:
- your health insurance (average $800/month, about $9,600 a year),
- the cost for your liability insurance ($100-$200 a month, about $1200 a year),
- general business insurance ($50-$100/month, about $650 a year),
- EHR subscription ($50+ a month, about ),
- reserved office telephone line (about $20 a month)
- HIPAA compliant Telehealth software (about $30 a month)
- Reserved fax line (about $10 a month)
- Biller (varies, usually 3% of what you bill to your clients)
- Internet bill (about $40 per month)
- Worker compensation (about $1000 a year)
Your annual income as an independent contractor is approximate $
Let’s now see how much you would be paid as an employee if you were to work with us full time.
Full-time income: $ 103,680, minus employee taxes
Would I make more money working as an Independent contractor or as an employee?