What is a 1099 contractor? A plain-English explanation

If you're new to working as a 1099 contractor, the terminology can be confusing. Here's a plain-English overview.

1099 vs W-2

A W-2 employee works for a company that withholds taxes from each paycheck. A 1099 contractor is self-employed and is paid the gross amount — they're responsible for paying their own income tax and self-employment tax.

Self-employment tax

1099 contractors pay 15.3% self-employment tax on net earnings (12.4% Social Security + 2.9% Medicare). Half of this is deductible above the line.

Quarterly estimated taxes

Because nothing is withheld, 1099 contractors typically owe quarterly estimated tax payments — April 15, June 15, September 15, and January 15.

Deductions matter more

Because you pay both halves of FICA and your full income tax, every deduction is more valuable to you than to a W-2 employee. Mileage is usually the biggest one.

MileTracker detects every drive in the background, lets you classify business or personal in one tap, and exports an IRS-ready PDF and CSV at tax time. Download MileTracker free on the App Store.