Not currently funded by an EA grant, but I am a fellow for an organization the classifies me as an independent contractor (IC), which in essence is what most people who receive a grant are likely to be (in the eyes of the IRS anyways). This is obviously not tax advice, always consult an attorney, etc. but as someone who has done this a few times in their career, I wanted to share some high level thoughts (also, this is going to be very focused on the U.S. and as an American taxpayer).
Is a 50K grant as an IC better or worse than 50K as a W-2 (traditional) employee?: In purely financial terms, you’re going to likely be worse off as an independent contractor as 1) you will have higher tax liability from self-employment taxes and 2) you will probably not have any benefits that are standard with traditional employment (medical, dental, 401k match, etc.) that you will have to manage yourself.
Should you incorporate yourself?: I had talked to an accountant about this a while back and my takeaway is if we’re talking about sums like 50k or 100k, there isn’t really a serious benefit. If you’re dealing with larger amounts per year, I would recommend speaking to an accountant and figuring out how to create an optimal structure, but for a regular salary, I think it’s better to just simply take it as a sole proprietor. That said, if you have concerns over legal liability of the services you provide, you might consider working through a legal structure, but this is not really a financial consideration.
How do you deal with things like healthcare?: If you’re in the U.S. there is a healthcare marketplace for each state now through ACA (Obamacare) that you can use to shop for private plans. For my 401k for simplicity I use Wealthfront, I also keep a life insurance policy that I used a broker to find, for other things I just pay out of pocket at cash prices (e.g. getting a teeth cleaning).
As far as how to think about it- I’m not a great person to respond as I’ve generally been pretty comfortable with a high level of personal career/financial risk, but I would just remind yourself that you probably have valuable skills and that even if you found you weren’t going to get renewed for a grant ~3 months before you run out of funding, you could probably find a new gig by the time it ends (that said, always good to have a few months of buffer just in case).
Not currently funded by an EA grant, but I am a fellow for an organization the classifies me as an independent contractor (IC), which in essence is what most people who receive a grant are likely to be (in the eyes of the IRS anyways). This is obviously not tax advice, always consult an attorney, etc. but as someone who has done this a few times in their career, I wanted to share some high level thoughts (also, this is going to be very focused on the U.S. and as an American taxpayer).
Is a 50K grant as an IC better or worse than 50K as a W-2 (traditional) employee?: In purely financial terms, you’re going to likely be worse off as an independent contractor as 1) you will have higher tax liability from self-employment taxes and 2) you will probably not have any benefits that are standard with traditional employment (medical, dental, 401k match, etc.) that you will have to manage yourself.
Should you incorporate yourself?: I had talked to an accountant about this a while back and my takeaway is if we’re talking about sums like 50k or 100k, there isn’t really a serious benefit. If you’re dealing with larger amounts per year, I would recommend speaking to an accountant and figuring out how to create an optimal structure, but for a regular salary, I think it’s better to just simply take it as a sole proprietor. That said, if you have concerns over legal liability of the services you provide, you might consider working through a legal structure, but this is not really a financial consideration.
How do you deal with things like healthcare?: If you’re in the U.S. there is a healthcare marketplace for each state now through ACA (Obamacare) that you can use to shop for private plans. For my 401k for simplicity I use Wealthfront, I also keep a life insurance policy that I used a broker to find, for other things I just pay out of pocket at cash prices (e.g. getting a teeth cleaning).
As far as how to think about it- I’m not a great person to respond as I’ve generally been pretty comfortable with a high level of personal career/financial risk, but I would just remind yourself that you probably have valuable skills and that even if you found you weren’t going to get renewed for a grant ~3 months before you run out of funding, you could probably find a new gig by the time it ends (that said, always good to have a few months of buffer just in case).
Really? You need professional legal advise to be an independent contractor in the US?