Are the taxes for a contractor higher than an employee?

Question

I might start working for a company as a contractor and I heard the taxes are higher, is that correct? or it only means instead of the company withholding the taxes, I have to pay them myself. In other words, is it the same tax rate? Thanks,

Answer 1

As a contractor you'd pay both the employer and the employee portion of social security and medicare, so yes they're higher, by 7.65%.

Answer 2

I live in CA and I am unsure if every state is at the same rate, but as far as I know once you become an Independant Contractor you have to pay the Self-Employment tax of 15% on top of your regular taxes. Also you will want to pay quarterly tax estimates on your earnings so that at the end of the year you don't end up paying penalties for unpaid taxes throughout the year.

Answer 3

Yes.

An employee pays 7.65% in Social Security and Medicare taxes.

A self-employed individual pays double that -- 15.3% -- since the employer matching portion has to come from the individual.

Income tax rates are the same either way.

Answer 4

The tax rate is the same, except you have to pay all your social security tax yourself, which will at least double that amount. You will also have to provide your own insurance.

Answer 5

There is a self-employment tax of about 7%. It is the difference between what the employer pays for Soc. Sec. and what you pay as a self employed person. Usually your deductions for being self employed offset this amount.