Understanding billing rates

Table of Contents

Understanding billing rates

What will get more money after taxes?

$70 on W2 or $63 on C2C to the personal LLC?

It looks like C2C is going to be the best option for a given billing rate amount - as opposed to receiving the same amount on the vendor’s W2. We can also pay for things like health insurance and other LLC expenses from the business account.

With vendor W2s, we don’t have to deal with payroll and other bookkeeping tasks. But there wouldn’t be any benefits like health insurance, 401K, etc.

Needless to say, things will improve significantly as the billing rate increases - regardless of whether it is on W2 or on C2C.

If the billing rate is $70 on W2

$4,389.32 * 2 = $8,778.64

  1. Gross Income: $11,200
  2. Federal W/H(M) $450.53 * 2 = $901.06
  3. Medicare $81.20 * 2 = $162.40
  4. Social Security $347.20 * 2 = $694.40
  5. South Carolina State W/H(M/0) $331.75 * 2= $663.50
  6. Total taxes = $2,421.36

So, the money that will be deposited into the personal account = $8,778.64

If the billing rate is $70 on C2C

In a typical month with 160 hours, with $70, the vendors will pay us $70 * 160 = $11,200. It would be enough to run payroll for $6,720 (60%) of this.

If we run payroll with $7255.80 of this,

  1. Expenses:Payroll:DirectDeposit:Harsha $5,912.92
  2. Expenses:Payroll:EmployeeTaxAmount:Harsha $1,287.08
  3. Expenses:Payroll:EmployerTaxAmount:Harsha $550.80
  4. Profit = 11,200 - 7,255.80 = 3944.20
  5. Subtract 12% of this for personal income tax = 3944.20 * 0.88 = 3470.90

So, the money that will be deposited into the personal account = $5,912.92 + $3,470.90 = $9383.82

If the billing rate is $63 on C2C

In a typical month with 160 hours, with $63, the vendors will pay us $63 * 160 = $10,080. If we run payroll with $5687.16 of this,

  1. ;; (5687.16)
  2. Expenses:Payroll:DirectDeposit $4,327.59
  3. Expenses:Payroll:EmployeeTaxAmount $952.41
  4. Expenses:Payroll:EmployerTaxAmount $407.16
  5. Profit = 10,080 - 5,687.16 = 4,392.84
  6. Subtract 12% of this for personal income tax = 4392.84 * 0.88 = 3865.70

So, the money that will be deposited into the personal account = $4,327.59 + $3,865.70 = $8193.29

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