tax question bonus vs reg salary
 

I am thinking about going into sales from accounting. My roomate, a sales guy, tells me, sure you can make 200k in a year, but you can also be canned tuna in 4 months.

my question is if i make 80k salary as accountant... and my sales friend makes 50k base + 30k bonus. what is the difference in take home pay??? i want to know in order to help me make my decision.

i'm no accountant but i think bonuses are taxed the same as regular income - if the bonus is in cash form. if the bonus is in stock options then i think if you exercise them you pay only capital gains. and though there might be upsides to being in sales, i can tell you as a married father of 2 boys and a mortgage i'd much rather be an accountant than a sales man.

But would you rather be a hammer than a nail?

;)

[QUOTE=trainwreck,Feb 1 2008, 05:03 PM]my question is if i make 80k salary as accountant... and my sales friend makes 50k base + 30k bonus.

Same. Commission, salary, bonuses, interest is all regular income. I am amused that the question is being ask by an accountant LOL, there, all better ;)

:LOL:

Yep, tax is same at the end of the day if both the sales person and accountant are a W-2 employee. If the sales guy is a 1099 guy (meaning technically self-employed) then he'll pay more tax because he has to pay both sides of the payroll taxes, whereas a W-2 employee only pays half and the employer pays the other half.

You can make good money in sales depending on company and commission structure, plus your skills, of course. Accounting is more stable year over year generally. I did accounting originally and now I'm in executive management. Accounting can be a good spring board into upper management if you're well rounded.

Actually a 1099 contractor will pay significantly LESS tax overall. You only have to pay payroll taxes if you have salaried employees. You don't pay those taxes if you are self employed. As a self-employed contractor you can deduct all expenses related to making a living, including the cost of your commute to and from work, your computer and office supplies, books, conferences, travel (if you are smart and connect it with business somehow like going to visit a client or make a sales call while you are away, etc.)

All in all a contractor will pay significantly less tax, a savvy contractor will pay as much as 50% less.

But as a self-employed person, you have to pay the full Social Security tax (~12% IIRC?), vs. as an employee splitting it evenly w/ your employer.

Yes you have pay the full SS load,but it's on adjusted net income and if you're savvy as cthree mentions, you should be able to get the adjusted income to a lower level. I went from being a W-2 employee to being a 1099 outside consultant with the same company. Another consideration might be to think about whether your employer pays your medical insurance. While it's a deductible expense if you're self-employed, it takes a large bite out of your income if you move from the employer paying it to having to eat that expense yourself.