Withholding
W-2 employers withhold federal and state income tax plus FICA from every paycheck. 1099 contractors receive gross payment with nothing withheld, making quarterly estimated payments the contractor's own responsibility.
FICA/Self-Employment Tax
W-2 employees pay 7.65% in FICA taxes, matched by their employer. 1099 contractors pay the full 15.3% self-employment tax themselves, though half is deductible.
Deductions Available
1099 contractors can deduct legitimate business expenses directly against their income (Schedule C), something W-2 employees generally cannot do for job-related expenses under current law.
Benefits Gap
W-2 employees often receive employer-sponsored health insurance, retirement matching, and paid leave that 1099 contractors must source and fund entirely on their own — a real cost worth factoring into how you compare a contract rate to a salaried offer.
This page is for educational purposes and isn't personalized financial or tax advice. Figures, rates, and program details change frequently — confirm current terms directly with lenders, tax professionals, or the IRS before acting.