If you get a $50K grant, is this better or worse on net than earning $50K of traditional W-2 employment income?
Worse, easily, but it costs them less. If a regular employer pays you a $50k salary, that is costing them more like $75k or $100k or something—they are paying part of the taxes, and the benefits, on top of the salary. So the real comparison is between a $50k salary and a $75k or $100k grant, in which case I would say the grant is better because you have more flexibility about benefits. Don’t have any dependents? As a grantee you can just not buy life insurance, and spend the money on something else. As an employee, you may not have a choice.
For tax efficiency, should grant recipients optimally incorporate themselves as an S-corporation, or a charitable foundation, or something else?
This is not legal advice, but my guess would be no. When a nonprofit pays its employees (which is what you would be if you set up a nonprofit and pay yourself), the employee still has to pay income tax on that just like anyone else, and the nonprofit still has to pay its share of social security taxes and such. For a typical EA job, if you aren’t employing anyone, or taking out loans for your work or something, you also don’t get any advantage in terms of liability. Incorporation does not protect you when you do something stupid. Incorporating protects you when someone else in your organization does something stupid. This is not useful if there is noone else in your organization.
How do EA freelance researchers deal with the things that are typically provided through the employer/employee relationship — things like healthcare, disability insurance, retirement savings accounts, and so forth?
I was self employed for years. Health insurance is easiest through obamacare but you could buy it form any insurance company. For savings, I used IRAs, and if you max those out there are other accounts available to the self-employed. I didn’t have disability insurance, but I imagine that can also be bought from an insurance company. But yes, you have to decide what benefits you want and go buy them yourself.
Worse, easily, but it costs them less. If a regular employer pays you a $50k salary, that is costing them more like $75k or $100k or something—they are paying part of the taxes, and the benefits, on top of the salary. So the real comparison is between a $50k salary and a $75k or $100k grant, in which case I would say the grant is better because you have more flexibility about benefits. Don’t have any dependents? As a grantee you can just not buy life insurance, and spend the money on something else. As an employee, you may not have a choice.
This is not legal advice, but my guess would be no. When a nonprofit pays its employees (which is what you would be if you set up a nonprofit and pay yourself), the employee still has to pay income tax on that just like anyone else, and the nonprofit still has to pay its share of social security taxes and such. For a typical EA job, if you aren’t employing anyone, or taking out loans for your work or something, you also don’t get any advantage in terms of liability. Incorporation does not protect you when you do something stupid. Incorporating protects you when someone else in your organization does something stupid. This is not useful if there is noone else in your organization.
I was self employed for years. Health insurance is easiest through obamacare but you could buy it form any insurance company. For savings, I used IRAs, and if you max those out there are other accounts available to the self-employed. I didn’t have disability insurance, but I imagine that can also be bought from an insurance company. But yes, you have to decide what benefits you want and go buy them yourself.