Without getting into the Legalities of using independent Contractors, I will lay down here what the numbers are when you charge the above price.
Tax Professionals will tell you to put away between 30% and 40% of your profits to cover your taxes. I have included the tax costs at the different tax scenarios, we consider a comparative analysis. Both models assume 12 hours worked, completion of 10 stores, and a charge of $140.00 per store. Each scenario involves a single Contractor doing the work and a cost of $80.00 paid to him per store.
I. Overview
A. Purpose: Comparative analysis of independent contractor model including the 30% vs. 40% tax rates.
II. Basic Inputs (Same for Both Scenarios)
A. Hours Worked: 12
B. Stores Completed: 10
C. Price Charged per Store: $140.00
D. Number of Owners: 1
E. Cost Paid Per Store: $80.00
III. Net Labor Costs
A. Net Cost (Per Store): $80.00
B. Net Pay to Contractor: $800.00
C. Hourly Average Pay: $66.67
D. Net Cost of Work Done: $800.00
IV. Contractors Numbers
A. Vehicle Costs (Daily Average): $55.00
B. Gross Income: $800.00
C. Gross Overhead: $138.00
D. Taxes and Profit
- 30% Tax Rate
a. Taxes: $198.60
b. Profit: $662.00
c. Left After Taxes: $463.40
- 40% Tax Rate
a. Taxes: $264.80
b. Profit: $662.00
c. Left After Taxes: $397.20
V. (Employer’s Perspective)
A. Employer’s Direct Cost: $138.00
B. Gross Income: $1,400.00
C. Employer’s Gross Cost: $938.00
D. Gross Costs Per Store: $93.80
E. Gross Hourly Costs: $78.17
F. Taxes and Profit
- 30% Tax Rate
a. Taxes: $138.60
b. Profit: $462.00
c. Left After Taxes: $323.40
- 40% Tax Rate
a. Taxes: $184.80
b. Profit: $462.00
c. Left After Taxes: $277.20
VI. Desired Profitability
A. Costs + 30%: $1,219.40
B. Actual Profitability: 33%
C. Actual Price Per Store Needed: $121.94
