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Comparing contracts: Signing bonus (1099) vs higher Base (w2)

Home Personal Finance and Budgeting Comparing contracts: Signing bonus (1099) vs higher Base (w2)

  • Avatar PoorDocinCO 
    Participant
    Status: Resident
    Posts: 1
    Joined: 03/14/2019

    In comparing contracts, anyone more intelligent than me that can help me figure out the difference if say 25% of a base was given as a signing bonus vs the higher base. Considering scenario a the bonus would be paid as 1099 income. Obviously if the difference remained 25% long term the answer is obvious but this should be just for the first 18 months.

     

    Thanks

    #198489 Reply
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 426
    Joined: 06/18/2018

    OK, so let’s say 300k for base as a W2.

    Vs. 225 base (W2) + 75k as a 1099.

    All of it as W2 results in more after tax dollars in your pocket.

    Only advantage to the 1099 is you could write off some expenses and fund an i401k and you’d get your money in one fell swoop up front, which may help if you’re currently broke as your handle implies.

    Disadvantage to that 1099 income as opposed to W2 is if you have any sort of employer match or other benefits that are tied to a percentage of your base salary. Depending on your situation otherwise, the lower base pay may make it less favorable for you to qualify for a mortgage or student loan refinancing in that’s in the cards for you.

    And, you’re also stuck at a lower base. Unless ‘this should just be for 18 months’ (hahaha) is written in stone in a contract explicitly along the lines of ‘base salary becomes X+75k on 1/1/2020.

    #198528 Reply

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