Independent contractor versus employee on commission

[Trendy]

I'm negotiating to rent a room at a hair salon. The one I'm working at right now may be closing, soon. The owner was asking me if I would become an employee and work on commission only, instead being an IC. He thought it would be better for me tax wise. I have no clue how to calculate it. If we do the math on $65/hr massage, I would get 70% ($19.50) as an IC with a cap of $500/month and have to pay about 30% taxes on that, right? If I'm on commission, he would have to pay the taxes for me, right? I'm already a full time employee at another job and this would be my side job until I have enough clients to switch over to full time. Thanks a bunch. Have a great day!

 

[will s]

Ms.Simon,
Your 70% of a $65/hr massage would be $45.50... his portion (30%) would be the $19.50. So, you would be paying your own taxes (minus any expenses) on the $45.50 per hour.
It seems like a reasonable deal to me but there are probably factors you have not included in the data... such as who provides the linens, oils, table, music, etc. My guess is you?
In addition, what is the size of the room and is $500 per month (cap) reasonable for that space?
Who schedules you? Are there expenses associated with that? What about advertising?
Also especially in hair salons, have you sat in the space during a busy Saturday morning? Have you considered the noise level, the perm smells, etc? Sometimes such issues can be overcome with a lot of thought and some cash... but not always.
Can you make changes to the room if needed? Will you be the only one with access and permission to use the space?
(You don't want to come in to find out some stylist came in for a nap on your table...)
Think about it, do a little research here on the board... but most of all, definitely get a written contract spelling out as much as possible of your IC agreement.
And please, keep us posted on whether you accept it and how it turns out!

 

[saywhat]

Independent contractor versus employee on commission

I would get 70% as an IC with a cap of $500/month and have to pay about 30% taxes on that, right?

You would have to pay taxes as a self employed person, which are about 15% (both 1/2s of FICA, plus a little FUTA and state unemployment tax thrown in). Unless you make over $45K a year for both jobs, you will pay no federal income taxes, and probably very little state income tax.

Working PT, you would probably never reach the $500 cap. that is over 25 massages in a month.

If I'm on commission, he would have to pay the taxes for me, right?

He only pays taxes if you are his employee, not as an IC. It does not matter how you get paid -- straight hourly, 100% commission, fee per service or something in between.