Given the amount of income, while I agree that you will avoid 1/2 of the payroll taxes if you elect to take the job as a W-2 employee, there is another approach you can take to filing taxes if you elect to take the job as a 1099 contractor that will end up saving you money in taxes.
You could take the job as a 1099 contractor, create an LLC, and then file Form 2553 to have the LLC files taxes as an S Corp. When you do that, you will need to report some of the 1099 income as W-2 wages paid out from the LLC to you. The amount reported as wages should be reasonable. A good rule of thumb is the 60/40 rule. The 60/40 rule is a simple approach that helps S corporation owners determine a reasonable salary for themselves. Using this formula, they divide their business income into two parts, with 60% designated as salary and 40% paid as shareholder distributions. The 40% will not be subject to any payroll tax at all (15.3% self-employment tax or 7.65% if you're a W-2 employee through the company you have a job with). By electing to take the job as a 1099 contractor but filing the contract income and associated expenses on an S Corp return, you'll end up saving at least $4,590 in taxes ($150,000 x 40% x 7.65%).
Ruth C-L, CPA, Attorney
