1099 contractor vs. regular employee wages?

Question

I just got hired by a company as a 1099 contractor. I wanted to find out what the difference in what they are paying me as a contractor as opposed to hiring me direct. What taxes will I owe above what I would have paid as an employee? I can think of a few examples like 1/2 of the social security and all unemployment taxes, but I have no idea of how much I will be charged as opposed to how much the employer usually splits with me if I was a full-time employee. What my question boils down to is, what is my "real" wage after the taxes that I would not have had to pay if I were an employee? I live in Michigan and make $25 and hour.

Answer 1

you are considered "self employed" in the eyes of the IRS. That means a lot to you. Aside from owing the other half of your FICA and having no unemployment insurance, you still owe Federal, State and maybe local taxes. BUT, as a self- employed person, you can expense transportation costs (auto mileage), business expenses, insurances, advertising,etc (see part II od schedule C) and THE BIGGIE: you can open a SIMPLE IRA and write off up to $12000 per year. Normal IRA is $5000. If you're good with documentation, you will probably end up better off as a contract employee.

Answer 2

You will be required to pay any state and local city taxes, SDI, (if your state offers disability), federal income tax, social security. The rate of taxes for unemployment will be higher because there is no employer contribution for unemployment. Check the web site paycheckcity.com to run a mock pay check and see what taxes you should have taken out.

Answer 3

when you are a private contractor you pay all of your ssi taxes yourself. in other words if you were an employee, single, they would take out about 25 percent of your pay for all taxes. when you are a private contractor you will be paying out anywhere from 33 to 40 percent in taxes. also you will have to file and pay quarterly estimate taxes to both the federal and state.