Expert: Ed McFarland - 8/8/2004

Question
I have got an opportunity where I can bill a company $72 per hour and then pay the contractor working there $60 per hour. This position is in California. The contractor wants W2. I would like to know how much would I have to pay for Fed taxes, State taxes, FICA, Social Security, Unemployment etc. I am trying to evaluate if this deal is even worth the effort. I would really apreciate if you could help me understand the expenses from my side to provide this employee W2.

Answer
The rule of thumb is to add about a third of the hourly rate to get the employer's share of FICA and taxes. A subcontractor assumes those costs.

The contractor doesn't want to have to make his quarterly payments for his contribution and the payments for the self employment tax.

Hope this helps.