I got offered a contract job with a state government. They have contractors onboard through approved vendors. The state will pay the vendor $85/hour, the vendor would take a cut and pay me. I had to get quotes from a bunch of approved vendors, one of them gives the choice of $80/hour as C2C or $65 as a W2 employee.
I have no prior contract work or C2C experience, I believe I'd incur some overhead and have to pay some additional taxes, but I'm thinking with the difference between C2C and W2 rates I would come out ahead.
Neither option comes with benefits like medical, which is fine because I'm on my spouse's plans.
I told the vendor I would choose the C2C rate and have submitted filings to form an LLC set up as an S-corp. I'm planning to get an EIN and open a business bank account.
The vendor hasn't explained to me how everything works, and I want to understand how this process normally works before I talk about details with the vendor.
I believe the way this would typically work is I would submit my hours worked to the vendor. I'm not sure if this would be an invoice I would generate or if it's just through some time keeping system on their end. The vendor would then pay my LLC. I'm not sure if this is usually done by direct deposit like a normal job or if something else is standard. I believe my LLC would be on the hook for some payroll taxes, and that these payroll taxes depend on how much I pay myself. Once the LLC receives the money I would then send myself a paycheck based on some reasonable hourly rate. At the end of the year my LLC would give me a w2 for me to do my personal tax return as normal. I would also have to file taxes for my LLC.
I'm thinking I would need the following:
* An LLC set up as an S-corp (submitted awaiting approval)
* An EIN (pending)
* A business bank account (waiting for LLC and EIN to come through)
* Software for things like bookkeeping, invoicing, payroll, etc (not sure if something like QuickBooks handles everything or if I need to get more than one tool e.g
Gusto)
* Business insurance - I've heard this may be required but don't know anything about it yet.
* A CPA - I want to explore ways to minimize taxes without getting into trouble
Does anyone have experience with taking C2C contract jobs? Is my understanding pretty close or am I missing anything major? Can anyone recommend what kinds of tools and services I should consider to help keep the workflow simple while keeping costs down? Are there any specific clarifying questions I should be asking the vendor? Are there any resources to help me learn more about how this works?