My spouse has W2, my work allows me to select 1099 or W-2 in medical field. Does filing jointly help reduce 1099's SS and medicare tax? Or I still need to pay full 15.3%

[andysavetax]

Files jointly. - My spouse has W2, my employer allows me to select 1099 or W-2 in medical field job and rate is the same for either 1099 or W2. My husband and I make pretty much the same money too.

Does filing jointly help reduce 1099's FICA Social Security and medicare tax? Or I still need to pay full 15.3%?  I want to know since my spouse w2 already pays some portion of the FICA, does that help pay for mine too? 

Also, besides the tax write-offs advantage, I want to know what else can 1099 help me on in terms of the taxes. Should I pick W-2 instead to make things easier or will I benefit more with 1099. 

We have no kids, no loans, just rent an apartment. Thank you very very much for your time.

[TaxGuyBill]

You still pay the full amount.  Contributions to Social Security are an Individual thing.

You didn't give any details about what your work entails, but if you don't have any deductible job expenses, it will cost you more to be an Independent Contractor (1099) than an employee (W-2).  You also may not have Worker's Compensation, Disability, or Unemployment Insurance.

As a side note, in most cases your employer can't legally be offering you that choice.  The law dictates whether you are an  Independent Contractor (1099) versus an employee (W-2).  You can't legally pick-and-choose.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-o...>

[Opus 17]

It depends on your compensation and your expenses.

Suppose your employer pays $100 an hour on a W-2.  They also pay $7.65 in social security and medicare tax, and they withhold $7.65 in social security and medicare from you (plus federal and state income tax but that's the same either way).

Now, if you go 1099-MISC, will your gross be $100 per hour (costs you more in tax, saves money for the employer) or will your gross be $107.65 (same net cost to the employer, same net cost to you.)

Also, with self-employment, it is easier to deduct job-related expenses like mileage and a home office, and those expenses reduce your taxable income AND your net profit subject to SE tax.  If you are a W-2 employee, your work-related expense deduction is limited by the 2% and itemizing rules, and work expenses do not reduce your income subject to FICA and medicare tax.

But I agree, that choice is probably not legal.  Someday, someone could sue them, and that could come back on everyone else in your situation.

[andysavetax]

Thank you both for sharing your insight.  So my spouse has W2, and if I have 1099 and we file jointly, do we have $12,700 standard deductions?  Or it would be only $6,350? As 1099, Can we still deduct unreimbursed expenses directly from income on top of that $12,700?  After more analysis of my deductible job expenses, I don't think it will exceed higher than $10,000.

My job is working in a hospital/clinic/ home care. Would property home tax or rent from my apartment be consider deductible for a 1099 even though I live there and I don't necessary work there?

[Opus 17]

So I see part of the confusion.  Start with a copy of form 1040 (print a blank one if you like).  The front page lines 7-22 is all your income (all your joint income if you are married filing jointly.)  Lines 23-37 and all the back page is all your personal deductions (standard deduction or itemized deductions, personal exemptions, tax credit for child car or electric cars or solar panels, whatever.)

If you are self-employed, all your net business income is reported on one line, line 12.  The income comes from your schedule C.  If you have 3 separate businesses you might have 3 schedule Cs that are combined on line 12 to give one income figure that goes into your personal (or joint) income.

For things like standard deduction, it doesn't matter where the income comes from; it could be wages (line 7), a self-employed business (line 12), selling investments (line 13), pensions and IRAs (line 15-16) or anything else.

Now print a blank copy of schedule C.  Schedule C is used to calculate your net profit or loss from self-employment.  (A person who has several jobs might have separate Schedule Cs, if they want to or are required to keep the profit and loss from each business separate.)  Schedule C calculates your net profit or loss by taking all your gross income and subtracting the expenses you incurred in earning that income.  A mechanic might deduct expenses for purchase of tools and supplies.  A home health aide might deduct expenses to buy scrubs and other supplies, as well as deducting expenses for CME, licenses and certifications.  If you drive a car you can usually deduct car expenses (subject to certain rules).  If you have a home office, you can often deduct a percentage of your homeowner expenses equal to the percentage of your home used for business.  But there are lots of rules and qualifications that need to be met, and certain potential down sides as well.

On schedule C, you deduct your expenses from your income to calculate the net profit from business.  (Your spouse as a W-2 employee, can deduct unreimbursed business expenses, but only as a personal deduction on the back page, as part of itemizing deductions instead of using the standard deduction.  That is much less favorable since there are several cutoffs that reduce the impact of the deduction.)

After you have your net profit or loss from all your schedule C businesses, you add up the total net profit and use schedule SE to calculate your self-employment tax (SE version of social security and medicare) and that goes on the back page of form 1040. 

Any business expenses you deduct on schedule C can't be deducted again on form 1040 or schedule A.

Here are some links to look at

https://www.irs.gov/businesses/small-businesses-self-employed

https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

https://www.irs.gov/uac/about-publication-463

[maheshr3]

In this case how and when does the 1099 employee pay the taxes and social security Medicare etx?

[DoninGA]

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@maheshr3 wrote:

In this case how and when does the 1099 employee pay the taxes and social security Medicare etx?

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If you have a net profit from your self-employment then you will owe Self-Employment taxes reported on Schedule SE.  You pay 15.3% SE Taxes on the net profit, both the employer and employee portions of Social Security and Medicare taxes with the SE taxes.  However 50% of those taxes are entered on your tax return as an Adjustment to Income thereby reducing your Adjusted Gross Income and your taxable income after either the Standard or Itemized Deduction.

[VolvoGirl]

Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment.  You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  

The SE tax is already included in your tax due or reduced your refund.  It is on the 1040 Schedule 2 line 4 which goes to 1040 line 15.  The SE tax is in addition to your regular income tax on the net profit.  You do get to take off the 50% ER portion of the SE tax as an adjustment on 1040 Schedule 1 line 14 which flows to 1040 line 8a.  Turbo Tax automatically calculates the SE Tax and Adjustment.

For 2019 Schedule C Net Profit or Loss now goes to 1040 Schedule 1 line 3.  Then the total on schedule 1 line 9 goes to 1040 line 7a.