How do I file taxes as a contracted employee?

Instead of receiving a W-2 for tax filing purposes, contract employees receive Form 1099. This is the form you submit along with Form 1040 for filing your taxes. Unlike an employee who has payroll taxes deducted from his paycheck, a contract employee is responsible for paying his own taxes.

Do contract employees get taxed?

Contractors have to pay taxes no matter what form they were paid in—even if they were paid in cash. When paying independent contractors, employers do not have to pay any employer taxes. Employees typically have social security and Medicare (FICA) taxes taken out of their paycheck.

What taxes do I pay as a contract worker?

The IRS taxes 1099 contractors as self-employed. If you made more than $400, you need to pay self-employment tax. Self-employment taxes total roughly 15.3%, which includes Medicare and Social Security taxes. Your income tax bracket determines how much you should save for income tax.

👉 For more insights, check out this resource.

Where can I get a contract labor tax form?

These contract labor tax forms are called Schedule Cs and can be submitted on paper or online. Schedule C (also called a Form 1040): This is your independent contractor tax form. Use it to report your freelance income and expenses.

👉 Discover more in this in-depth guide.

What happens if I file my taxes as a contractor?

In case of an audit, the IRS will try to determine who works for you is a contractor, and who works for you as an employee. If they decide that one of your subcontractors is fulfilling the duties of an employee, you could be penalized for not filing the correct taxes (ie. your share of FICA).

What’s the difference between employee and contractor tax?

As an employee, you pay about 7.5% and your employer pays the other 7.5%. As a contractor, however, you pay the full 15% (nicknamed “self-employment or SE tax”). That means, as a contractor, you pay 7.5% more in taxes than an employee does.

What kind of taxes do I pay as an independent contractor?

The payments you receive from your business don’t have any federal income tax withholding taken from them, because you’re not an employee, and there are no deductions for Social Security or Medicare. You’ll pay these in the form of self-employment taxes. 2