| Low Taxes Are Paid By Agency-Employed | | | | Such consultants get non-wage benefits such as 401 |
| Consultants | | | | (k) plans, health and welfare plans and even holiday |
| Doesn't 'low taxes!' grab your attention? American | | | | pay. These benefits can be highly beneficial, financially |
| workers are subject to two types taxes - one of | | | | and otherwise. Some agency consultants are also |
| them is federal income tax and the other is F.I.C.A. | | | | offered total compensation packages. |
| Federal Income Tax | | | | A consultant who is earning about $50,000 a year |
| This tax applies to everyone, regardless of whether | | | | benefits by having paid two weeks vacation, which |
| it is being withheld by the employer or not. It is paid | | | | can be valued around $2,000. Consultants also save |
| annually. Simply put, independent consultants who | | | | up to hundreds or thousands of dollars per year on |
| work for themselves and who file I.R.S Form-1099 | | | | federal taxes, due to company-sponsored retirement |
| are all subject to the same tax bracket as their W-2 | | | | saving plans. The savings due to health and insurance |
| consultant counterparts. Independent consultants | | | | benefits can be sometimes up to 15-20% of their |
| have to save enough around the year to cover their | | | | annual health salary. |
| annual Federal Income tax bills. Sometimes | | | | In-Depth Study |
| independent consultants also have to pay State and | | | | If you have some experience in the field of |
| local income taxes, as these taxes are applicable in | | | | consultancy, you may have wondered about |
| many states. | | | | non-wage benefits:o An agency consultant who |
| Independent consultants, as well as agency | | | | makes $50,000 probably gets five days paid vacation |
| consultants, pay the same amount of Federal Income | | | | (or more), which is worth about $1,000 before |
| Tax if their gross yearly earnings are the same, but it | | | | taxes.o 401 (k) plans offer agency consultants a |
| is paid differently. | | | | valuable tax shelter that will save them about $500 a |
| F.I.C.A | | | | year or more while paying Federal Income tax. These |
| This tax is mainly paid each period to fund Social | | | | savings can then be converted into future |
| Security and Medicare - it is applicable to all workers. | | | | investment gains.o Medical and dental coverage is |
| The rate on this tax is 15.3%. | | | | highly beneficial if an employer offers it. In addition, |
| Agency employed consultants pay 7.65% of their | | | | sometimes agencies help defray the cost of these |
| taxable income, whereas independent consultants pay | | | | medical benefits, thus reducing the payable taxes for |
| twice that amount. This means that an independent | | | | employees even further.o Fringe benefits such as life |
| consultant pays an additional $4,000 more in tax than | | | | insurance, vision coverage and dependent life |
| their counterpart who works through an agency. | | | | insurance go a long way into savings. |
| Agency Employed Consultant Benefits | | | | |