Advice appreciated - may quit racing for a bit

[OmniGLH]

Alright well I've only met a few of you, and barely know you guys from the board.  But you're all racers, and most of you race on a budget like myself. So I think your comments will be valid.  

I'm in kind of a tough decision point right now.  I'm stuck in a job that I don't really like (read: hate.)  I'll try not to whine, and just say that it's a LOT of hours (including lots of weekends and random 2nd/3rd shifts.)  My job is not "racer friendly" - they don't like the fact that I race, and I have to lie about what I'm doing with my vacation time, or it gets denied.  And vacation time is granted only if I'm not already expected to work that weekend (which is 3 weekends a month.)  It's a hell job, but it's a steady paycheck, and as much as I hate it, I'm good at it, so I've been toughing it out... all the while searching for something better.

I've been searching since August and have only had a nibble here and there, nothing promising.  Back in March, I interviewed for a contract position with MyPoints.com.  Interview went great, they were all set to make an offer, and something happened on their end that caused them to postpone things.

Yesterday, the day after getting into a heated discussion with my manager over my Physical Therapy (she is upset that I am taking time off of work for it - it wasn't until I used the words "disabled" and "FMLA" laws that she shut up)... I get a phone call from my friend who works at MyPoints.com.  She says "If you want the job, you've got it.  But we need you to start ASAP."

Should be a simple decision, right?

But, as some of you know - I crashed at BHF in April, and really messed up my shoulder.  Thankfully, I was still working for Motorola... and I had disability benefits.  Going to MyPoints, it's a contract position - NO disability benefits.  And the rate I'd be getting from them is only slightly more $$ take home, than I'm making now (after paying my own taxes, health care, etc.)

Without any form of disability, if I crash again, and can't work, I don't get paid.  That's not good.  If I take this position, I can't in good conscience let myself get back out on the track.

However, taking this position would be 40 hours a week.  That leaves me a lot of time to tackle some other projects, and perhaps work at getting my own business started on the side (something that I have NO time for now.)  

I love racing.  I'm not one to toot my own horn - but those that have raced against me, know I'm good at it.  I really hate to put it aside.  I have some good sponsors for this year, have some good contacts, know some of you - I don't want to have to start at the bottom again if I drop this for a few years.  But maybe I should.

Yesterday, I was feeling I wasn't gonna take it.  But after sleeping on it, I'm starting to lean the other way, even if it means putting some things on hold.  

What do you guys think?

[lbk]

Jim, knowing the company you work for very closely I would lean towards the get out while you can theory.

However I completely understand and think it would be a huge risk to race without disability. I know I passed a job up for that exact reason.

It can only be your decision, but the economy isn't the greatest right now, so maybe this is a short term solution, you're out already for a big part of the season due to your injury. So why not give this job a chance, and then before next race season you can re-evaluate your decision and also who knows what the economy is going to be like by then?

Just my .02 but that is a difficult decision. I know because it's one I look at frequently. Similar circumstances about a new job probably meaning no racing. But racing can only keep you happy so many hours in a week, but your job can make you miserable for 40+ a week. Tough choice.

[sdiver68]

Hey Jim,

First of all, a contract position should pay you way more $$ than a non-contract position.  You are assuming your own benefits and your own risk (at being dropped with little to no warning)  Double that risk with a dot com company.  Risk is fine, with the reward...but where is your potential reward?

Second, DI is important.  I am running this year without it, but I banked away a year's salary in liquid assets "just in case"...most S-T-Dis policies stop paying after a few weeks, and most long term policies stop paying after a year or 2, so you can say I'm self-insured on DI.

So, if you are that miserable in your current job, then I would say that's your call on how miserable.  But, if they can't pay you decently (at least 1.5X current after consideration of benefits and self-employment tax (like the ~6% employer portion of FICA minus new deductions) I would be inclined to re-negotiate or say no thanks.

If you do decide to go on your own, consider getting a non-cancellable DI and life policies now and "retire" for a year.  After the period of exclusionary activites is up, then you can race and have both coverages continue without additional cost.

Just my $.02

[OmniGLH]

My dad mentioned DI last night, but he didn't know much about it.

How does one go about obtaining DI?  Who do you use?

The new position is definitely not 1.5X.  More like 1.25X.  So I wouldn't really be making anything for taking the additional risk.  The risk is the price I'm paying for getting out of a job I hate.  

[h8mondays]

Omni,

First off let me say, it's a tough decision and not knowing you makes it hard to give sound advice for you.  For some background, I am an emergency room RN and I work a lot on contract status with nursing agencies, so as far as the contract stuff goes, I'm at least a little familiar albeit not in the same field.

Here is what I did to make money matters much much better for myself when working on contract.
I incorporated myself, which in Nevada is around $500 for a quick incorporation (you are incorporated in about 5 days).  Nevada is one of the best states to incorporate in because our corporate tax rate is 15% and yes you can incorporate here even if not a resident. (more on benifits of incorporating yourself in a minute).

This sounds complex, but bear with me because it's rather easy once you get the concept. When I work contract, I have whomever I am working for, cut my checks to my corporate name and I deposit them into my corporate bank account. Don't think that the money is tied up in any way, you spend it how you see fit, you are just leaving a paper trail for tax purposes. Once I deposit the check into my corporate account, I write a check to myself as a payroll check (no taxes taken out... more in a sec) it's usually something menail. (example... I'm paid $1200 by company X and there are no taxes taken out because I'm on contract, I then write a check to myself for payroll purposes for $400, again no taxes withheld and deposit it into my regular checking account.) I spend the entire $1200 and it's just a game for tax reasons.

Here's the good parts...

Everything you do from driving to work, insurance, cell phones and about everything you can imagine can be written off from your corporation at the end of the year. For example if your corporation made $50,000 this year and you write off $20,000, you will only be paying 15% tax on the remaining $30,000, which is lower than your personal income tax to begin with.

Because you paid yourself as an employee with no taxes taken out of your checks and as I said, it should be something menial, your corporation fills out a form 1099 and you file personal income taxes on/with that. If you've paid yourself crappy, you will only be paying taxes on say $10,000. and your tax burden is really low both for personal and corporate income taxes, thereby saving you a ton of money.

The biggest benefit of going this route is that you can get short term disability insurance, long term disability insurance and health insurance as a corporation and write the premium amounts off at the end of the year, so maybe you won't have to go without benefits and thereby continue to race.

Any good CPA can make this work out easily for you and if you can get the company you are going to contract with to write your checks to your corporation, your golden.  The other benefit if doing this, is that your business shell is set up when you get going on your own, as well as, any side money can be shuttled into the corporation in the mean time.

I don't know that this helps and if you need or want any more info, just let me know.  I'd be happy to help you out if it's something you are interested in and believe me, it's a lot easier than this post makes it out to be.  I've been doing this for years with no problems and because it's all above board and very legal, you aren't creating a future risk of audit of other headaches.

I believe that if more people could work on contract and knew more about doing this, they would because the tax savings and the sheer amount of stuff that is written off, is amazing.

[h8mondays]

As a side note, if you get the above settled and do the corporate thing, you can start shopping for all your insurances with self employed groups that buy in blocks and thereby get group discounts.  I'll search around and talk to some friends who do this and see what I can find for you if interested.

[sdiver68]

h8mondays has some good advice, a C Corp. and an S corp or LLC is common, but may not be worth the extra hassle depending on your circumstances.  A good CPA or Tax Lawyer can help you through.

Like I said, I'm self-insured on DI.  However, you can join small business groups (best) or go through a broker or search on-line for DI insurance.

[h8mondays]

Damn,

I forgot the best part about this, if you talk about your business even if only to yourself while racing, it's a business trip and mileage, a % of meals certain other things can be written off as business expenses :P

Another good thing for write offs is if you have a small office in your home, it doesn't matter if it's only a computer, because you can write off a percentage of your home use, as well as, cable bills, phone bills %, electrical bills % etc.

Here in Nevada, you would want to set up a closed corporation for reasons that you can check out online.  The biggest hassle with being incorporated is saving receipts and keeping your check books cleanly. The once a year stuff you have to deal with, takes about 30 minutes and is easy.

Hope this all helps.

Jay

[OmniGLH]

h8mondays I'm definitely interested.  I want to get as much of the whole picture in front of me as I can, so I can make the best decision.

And Steve any more advice... keep it rollin...

[OmniGLH]

Damn,

I forgot the best part about this, if you talk about your business even if only to yourself while racing, it's a business trip and mileage, a % of meals certain other things can be written off as business expenses :P

Another good thing for write offs is if you have a small office in your home, it doesn't matter if it's only a computer, because you can write off a percentage of your home use, as well as, cable bills, phone bills %, electrical bills % etc.

Here in Nevada, you would want to set up a closed corporation for reasons that you can check out online.  The biggest hassle with being incorporated is saving receipts and keeping your check books cleanly. The once a year stuff you have to deal with, takes about 30 minutes and is easy.

Hope this all helps.

Jay

Well, I was told from another friend of mine who is self-employed that it's very hard to make a lot of deductions like this if I only have 1 client.  Business trips, racing expenses, etc might raise an eyebrow.  He suggested that I keep my "expenses" down to less than 10% of the corp's income.

[sdiver68]

True to be cautious about taxes, again it really is an individual situation.  Consult a professional, although an LLC or C Corp may makes sense from a liability perspective also.

I've given my advice for now, I just am worried about you taking too low of a rate...how long is the contract for?

[h8mondays]

I'm not one to argue with others on certain write offs, but undoubtedly, you can write off some race stuff if even only one time a year. Call it your annual meeting. I'm not advocating doing anything that could get the IRS's eye on you.

My CPA is amazing with what she can do and every bit of it legal. I don't throw a lot of extracurricular write offs into my corp. because my normal write offs more than take care of things.  Seriously, I play way above board because I don't want any heat on me from the tax man and I've been doing this for 6 years without any problems. I'm also not even the slightest bit worried about an audit or anything of the likes because I know my tax preps are sound and everything can be backed up 110%.

On the small business front, my wife runs a small business from home and does things almost identical to me.  She's been doing this for about 7.5 years and has never had any problems either.

Good luck with your decisions.  If you do decide to go for it like this, I highly recommend incorporating in Nevada and if needed, I can turn you on to my accountant, which may be good because she's here in Las Vegas.