Why is my Blended Tax Rate so high?

[fperez418]

I am a contract employee using a single 1099-NEC to file and want to make sure the Blended Tax Rate of 48.6% is accurate. I'm being asked to pay over $6,700 on what I made this year which was $27,449. I was only sent a 1099, no W-2 as I am a contract employee. 

[HelenC12 · Accepted solution]

If you owe $6,700 and you made $27, 449, your effective tax rate is around 24%.  

Yes, the amount owed is probably correct. I recreated your tax situation for federal and the amount owed is approximately $4,400.  I don't know your state so I couldn't see the tax for the state. 

However, when you're self-employed, you not only have to pay federal and state income taxes, you have to pay Self-employment taxes. 

• Self-employment tax (SE tax), is the Social Security and Medicare tax paid by self-employed individuals. It is similar to the Federal Insurance Contributions Act (FICA), which is the Social Security and Medicare taxes withheld from an employee’s paycheck.
• When you’re self-employed, you are paid the full amount you earn.
• The SE tax rate is 15.3% with 12.4%for Social Security and 2.9%for Medicare.

Related information: What self-employed expenses can I deduct?

[fperez418]

Hello, Thank you for your reply and your help! This definitely helps contextualize things a bit - my taxes changed from last year so this is my first time going the self employment route. Thanks again for the info!