Welcome to the age of the 1099
But being a 1099 contractor isn't always straightforward. It is especially confusing to file taxes. Are you technically self-employed? Or are you classified as an employee? Should you pay quarterly taxes? If so, how?
If you’re feeling overwhelmed, don’t worry; you’re not alone.
We’re here to help. We’ve answered the most common questions about paying taxes as a 1099 contractor!
Is there a difference between being a 1099 contractor and being self-employed?
How to pay taxes as a 1099 contractor
You are responsible for federal and state (if applicable) taxes on your adjusted gross income. So the more tax deductions you can find, the more money you’ll keep in your pocket.
Filing an annual return: To file yearly taxes, you’ll need a Schedule C form. Use the income calculated on this form to calculate the amount of Social Security and Medicare taxes you should have paid during the year. You’ll file a 1040 or 1040 SR to report your Social Security and Medicare taxes.
Filing quarterly taxes: First, calculate your adjusted gross income from self-employment for the year. (The more deductions you find, the less you’ll have to pay!) Use the IRS’s Form 1040-ES as a worksheet to determine your estimated tax payments.
What is the Self-Employment Tax?
If you are a high earner, a 0.9% additional Medicare tax may also apply.
How much will I pay in taxes?
With that in mind, it’s best practice to save about 25–30% of your self-employed income to pay for taxes. (If you’re looking to automate this, check out Tax Vault!) And, remember, the more deductions you find, the less you’ll have to pay.
How can I lower my taxes?
Example: Sam uses Everlance’s #1 mileage & expense tracker to track his work mileage and expenses automatically. At tax time, he exports this information and writes everything off. He typically finds $6,500/yr in deductions.
Remember: The more deductions you have, the lower your taxable income will be, and the less you’ll owe to the IRS/the bigger your refund.
Do I need to pay quarterly taxes?
- You expect to owe $1,000+ on taxes.
- You made $400+ in self-employed/1099 income.
For the full details, check out the IRS’s clarification: “Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed.”
While the annual return is due on Tax Day (April 15th), quarterly tax payments are due every quarter. Make sure to pay estimated taxes on time.
The four estimated tax payments are usually due each year on the 15th of April, June, September, and January. If that date falls on a weekend or federal holiday, the filing deadline is pushed to the following business day. If you don’t pay on time, then you may be subject to a penalty.
How do I pay quarterly taxes?
1. Calculate your adjusted gross income from self-employment for the year.
2. Use the IRS’s Form 1040-ES as a worksheet to determine your estimated taxes.
Understanding 1099 contract work and taxes
- As a 1099 contractor, you’re typically responsible for quarterly and annual taxes.
- The easiest way to lower your taxes is to track your mileage and expenses using an app like Everlance.
Meet Everlance, the #1 mileage & expense tracker.
Your tax situation is unique—just like you! This information represents generalized tax information. If you need help with your specific tax situation, please reach out to your tax advisor.