How is being self-employed different from being an employee?
It's different in a couple of ways.
When You’re an Employee:
- You get a W-2.
- Federal, state, Social Security and Medicare taxes are withheld from your paycheck each payday.
- You pay half of your Social Security and Medicare taxes, and your employer pays the other half.
When You’re Self-Employed:
- You may get a 1099-MISC.
- There's no employer to withhold taxes from your pay.
- That means federal, state, Social Security and Medicare taxes aren’t withheld from your pay.
- Instead, you make your own quarterly estimated tax payments.
- You pay all your Social Security and Medicare taxes, but you qualify you for a self-employment tax deduction.
- You can deduct expenses related to your work, things like mileage, home office expense, supplies, etc.
After you enter your 1099-MISC, we’ll review your work related expenses including the deductible part of your self-employment tax. We’ll also help you calculate your estimated tax payments for next year so you can avoid having to pay all your taxes at once.