A W-2 means you are an employee. Your employer withholds income tax, Social Security and Medicare from each paycheck and sends it in for you. A 1099-NEC means you are an independent contractor — nothing was withheld, and the tax bill is entirely yours.
The self-employment tax surprise
Contractors pay both the employee and employer shares of Social Security and Medicare — 15.3% on top of income tax. Many new freelancers discover this the hard way in their first filing season.
The upside: deductions
Contractors file Schedule C and can deduct legitimate business expenses — mileage, equipment, software, a home office — before self-employment tax is calculated. Employees generally cannot deduct work expenses at the federal level.
Different rhythm
Employees settle up once a year. Contractors are generally expected to pay quarterly estimated taxes. If you received a 1099 this year, it is worth understanding estimated payments before the next deadline — not after.
Your situation
General information only — your return may differ. If this article sounds like your situation, let's look at it properly.
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