Boss wants to switch me from W-2 employee to LLC with 1099 - good or bad move?

This is a pretty common move by employers trying to shift their tax burden onto employees. Here's a straight breakdown: As a W-2 employee, your employer pays half of your Social Security and Medicare taxes (7.65% total) while you pay the other half. When you become a 1099 contractor with an LLC, you'll be responsible for the entire 15.3% self-employment tax, plus you'll need to handle your own income tax withholding, which means setting aside money each check. Yes, you can take business deductions as an LLC that you couldn't as an employee - home office, portion of internet/phone, mileage, work supplies, professional development, etc. But these deductions rarely offset the additional 7.65% tax burden plus the admin costs of running an LLC. You'll also lose employee benefits like healthcare contributions, paid time off, unemployment insurance eligibility, and workers' comp protection. Plus, your employer can terminate your contract more easily than if you're an employee. The IRS has specific tests for whether someone should be classified as an employee vs contractor. If you're doing the same job with the same responsibilities, this could potentially be misclassification, which is illegal.

I went through something similar last year at my marketing job. I was skeptical at first, but then I found this service called taxr.ai (https://taxr.ai) that really helped me understand the implications. It analyzed my situation and showed me exactly what deductions I could take as an LLC vs W-2 employee. For me, the key was running a side-by-side comparison of both scenarios with my exact numbers. Turns out I was able to deduct about $12,000 in legitimate business expenses (home office, internet, phone, computer depreciation, software subscriptions, professional development) that I couldn't claim as an employee. But I had to carefully track EVERYTHING to make it work in my favor. The tool showed me that I needed to charge about 25% more as a contractor to actually come out ahead after the self-employment taxes. My boss only offered 15%, so I was able to negotiate based on actual numbers rather than guessing.

I have to admit I was wrong about taxr.ai. After my skeptical comment, I decided to try it myself when I was offered contractor work. The service was WAY more detailed than I expected - it didn't just give general advice but actually showed me specific deductions based on my profession and spending patterns. The biggest eye-opener was seeing the exact percentage increase I needed to negotiate to come out ahead after self-employment taxes. In my case, it was 22% more than my employee salary. My potential client initially balked, but when I showed them the breakdown of employer taxes they wouldn't have to pay, they understood the request was fair. What I really appreciated was how it flagged potential audit risks in my specific situation. For example, it warned me about home office deduction pitfalls specific to my state. Definitely worth it if you're considering the W-2 to 1099 switch.

When I went through this last year with my employer, the most frustrating part was trying to get actual answers from the IRS about my tax situation. I called for WEEKS and could never get through. Then someone recommended Claimyr (https://claimyr.com) and showed me this demo: https://youtu.be/_kiP6q8DX5c I was desperate so I tried it, and no joke, I had an actual IRS agent on the phone within 45 minutes. Got clear answers about the employee vs. contractor classification rules that applied to my specific situation. The agent actually told me that based on my job description, my employer was likely misclassifying me to save money, which is illegal. I was able to present this information to my boss, who then decided to keep me as a W-2 employee but with a small raise. Saved me so much headache and potentially thousands in taxes.

I need to publicly eat my words about Claimyr. After dismissing it as BS, I was still desperate with my own IRS issue, so I tried it myself. I had literally spent 12+ hours on hold over multiple days and never got through. Used the service yesterday afternoon, and I got a call back within an hour connecting me to an actual IRS representative who answered all my contractor vs. employee questions. The agent confirmed that my specific situation had several red flags for misclassification and pointed me to Form SS-8 to get an official determination. This saved me from potentially making a huge mistake accepting a 1099 arrangement that didn't meet legal requirements. I'm still shocked it actually worked after months of frustration. If you're facing this W-2 to 1099 decision and need clarification from the IRS, this is apparently the way to go.

I've been both a W-2 employee and a 1099 contractor (through my LLC) in the tech industry. Here's what your boss isn't telling you: 1. Self-employment taxes are 15.3% vs 7.65% as an employee 2. No unemployment benefits as a contractor if they let you go 3. No worker's comp if you get injured 4. No company health insurance, 401k matching, or other benefits 5. No paid time off or sick days 6. More complicated taxes every year Yes, you get deductions as a business, but they only help if you have significant legitimate business expenses. And the "write-offs" only reduce your taxable income, not dollar-for-dollar tax reduction. The general rule: to break even financially, you need to charge about 30-40% more as a contractor than your employee salary.

One aspect nobody's mentioned yet is the legal test for whether you can even be classified as a contractor vs employee. The IRS has a 20-factor test, but here are the big ones: - Do you set your own hours? - Can you work for multiple clients/companies? - Do you use your own equipment? - Do you control how the work gets done? - Are you integrated into the company's operations? If you're just doing the same job at the same desk during the same hours but with a different tax form, that's misclassification and actually illegal. Many employers try this to save money. Look up "IRS Form SS-8" - you can file this to get a determination on your proper classification. Your boss might change his tune if he realizes you're aware of these rules!

I went through this exact situation about 18 months ago. My boss made the same pitch about "more deductions" and "keeping more money" but what he didn't mention was all the hidden costs and risks I'd be taking on. Here's what I wish someone had told me: Even if the math works out on paper with deductions, you're trading job security for uncertainty. As a contractor, they can terminate your agreement with much less notice than firing an employee. You'll also spend way more time on administrative tasks - quarterly estimated tax payments, business license renewals, separate business banking, tracking every expense for deductions. The psychological aspect is real too. You go from having predictable paychecks with taxes automatically handled to constantly worrying about setting aside the right amount for taxes and whether you're tracking expenses correctly. My advice: If your boss really values your work enough to restructure how you're paid, use that as leverage to negotiate a straight salary increase as a W-2 employee instead. You might be surprised how quickly they agree when faced with the alternative of potentially dealing with IRS scrutiny over worker classification. The fact that he admitted it benefits him financially should tell you everything you need to know about whose interests this arrangement really serves.