Saving for Taxes if You’re Non-W2 Employed

Whether “Non-W2 Employed” means you get a 1099 form for independent contractor work or you don’t get any kind of form because you’re self-employed, you still have to worry about taxes. Because you don’t have an employer taking taxes out for you, you have to figure out how to pay them yourself.

Determining Your Tax Bracket

Taxes can be complicated. My hope is use this explanation to simplify them for you as much as possible.

How much you make, and how you file (single, married filing jointly, married filing separately), will determine your tax bracket. The federal government taxes your income, as do (most) states. In order to determine what percentage of your income your federal and state (and possibly local) governments want from you each year, you have to let the internet do a little math for you.

Don’t worry, it’ll be mostly painless. I promise.

Federal Income Tax Bracket

The IRS breaks it down for you on their website (except I can’t find the page at the moment), but I found a really great calculator that does all the math for you, which is even better.

Personal Example: Knowing that my husband and I file jointly, and his salaried wage is $35,000 a year and mine is around $25,000 (between working for myself and working at my job), I used the tax bracket calculator I mentioned above to figure that the tax bracket on our combined $60,000 a year is 15%.

If I was single and making $25,000 a year, my tax bracket would be 15% as well, but if my husband was single, the tax bracket for his $35,000 a year would be 25%.

It’s a fun little calculator, if you like that sort of thing. ^_^

Determining Your State Tax Bracket

In addition to Federal Income Tax, you also have to think about the Income Tax imposed by your state (and possibly your county/city/town). This varies, of course, from state to state, but I found a great calculator for this too: After you click the link, you can either choose your state from the left-hand column on the page and then enter your annual taxable income, or you can find your state and click the number in your state’s row that is close to your annual income. You have to scroll down to see the results after you hit calculate, but there is a lot of information packed into the calculator results, including your daily, weekly, and monthly income amounts, and your federal tax rate.

Personal Example: I currently live in Colorado, and make $25,000 a year. According to the calculator, my state tax is 4.63%. But, because Colorado taxes by state, county, city, AND county district, my actual tax rate will be more than that (Around 5.8%). If you live in a state that also has county, city, or local tax, you should google your state’s Department of Revenue and they should be able to offer guidance on what your various tax rates should be.

When I lived in Michigan, they only tax at the state level, which for $25,000 is 4.25%.

Put together, my total income tax is 20.8%.

In any case, once you know what your tax bracket is, you know how much you have to save. (Note: I often round up to the nearest percent when doing my savings calculation. So I would save 21% instead of 20.8%, just in case. I, however, don’t mind getting money back from the government, as long as it’s not an excessive amount.)

Saving to Pay Your Taxes

So, let’s pretend that you make $16,000 a year (that’s $8.00, 40 hours a week, 50 weeks a year), which puts you in the 15% federal tax bracket. And just for laughs, let’s assume you have to pay 6% at the state/local level for that income level.

That means that every time you get paid, via personal check, or cash, or paypal (or whatever), you need to take 21% of that income, and put it in a savings account. If you didn’t want to futz with odd percents, you could just save 25%. It’s never bad to save more than you need.

As for where to save it, I like the online savings accounts at Capital One 360 because they earn more than 0.7% interest and it take a few days to transfer the money fro there to my regular bank account, so I’m less tempted to use the money for something other than taxes. However, an account at Capital One 360 does take a few days to set up, so the savings account at your bank is just fine if it means you’ll start savings now instead of next week.

Paying Taxes

So by now you’re dutifully putting 21% (or 25%, or whatever percent) of your income in savings each time you get a paycheck, and watching the balance grow (which is exiting). Between now and April 15th, you have two choices for paying your taxes.

1) You can leave the money there and use it to pay your tax bill when you get it after filing you taxes. You will get a bill after you file your taxes, and you can pay it from your tax savings account. Whatever is left (if anything) can be used however you would normally use a tax refund.

2) You can pay estimated taxes, which is usually the better plan.

Paying estimated taxes is usually the better plan because the various governments you pay taxes to (federal, state, possibly local) really really prefer to get their money on a regular basis (at least quarterly). There are penalties and fees associated with “underpayment of estimated taxes” at both the federal and state levels, and some states charge a pretty penny in late fees if you do not pay estimated taxes and you were supposed to. (There is sometimes a grace period if you did not have estimated payments the prior year, but that varies from state to state.)

Fortunately, they make the math pretty easy. You have to pay at least 90% of your upcoming estimated tax bill, or an “safe harbor” amount to show a good-faith effort to pay your taxes on a regular and timely basis. Most people use 100% of their prior year tax bill for the “safe harbor” amount, because it’s easy to calculate and covers the bases. [Source:]

Estimated Taxes and Quarterly Payments

To avoid any penalties and fees that your various governments might want to exact for underpayment of taxes throughout the year, it would be wise to make quarterly estimated payments.

According the IRS webpage on estimated taxes:

If you are filing as a sole proprietor, partner, S-corporation shareholder, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return.

If you made more than $10,000, you probably owe $1,000 in taxes, so you should probably make estimated payments. If you overpay, you will get a refund, and you can tweak your savings amount for the next year.

Making Quarterly Payments

The federal government has an online payment system, Electronic Federal Tax Payment System (EFTPS) that you can sign up for to pay your quarterly estimated taxes. You have to enroll and wait for them to send you a PIN in the mail, so it’s a good idea to sign up at least two weeks before you need to make your payment.

They have also recently rolled out a system called “Direct Pay,” where you can set up a recurring withdrawal from a checking or savings account. This is easier to use than EFTPS becuase you don’t have to wait for the PIN to come in the mail. (For more information, visit’s explanation of the Direct Pay system.)

Some states have online systems for paying your estimated tax payments, too, but that varies from state to state, both in availability and ease of use.

“Self-Employment Tax,” aka FICA

Those of us who are self-employed, and make a bulk of our living that way, should definitely also be paying the Self-Employment Tax.

The Self-Employment Tax rate is currently at 15.3% and covers your portion of Social Security and Medicare. If you were employed by someone, they would pay half of this (7.65%) and take the other half out of your paychecks each month, but since you employ yourself, you’re responsible for all of it.

Fortunately, when you file your taxes, you get what would have been the employer’s half of your Self-Employment Tax back as an “above the line” deduction, which means it directly reduces your Adjusted Gross Income. So in the end, you only owe the same 7.65% of FICA that your W-2 employed friends are paying.

One way or the other, it would be wise to at least save the normal amount for your income taxes plus 7.65% to account for the portion of the Self-Employment tax that you will have to remit to the government. You may get a tax refund, and if you do, as mentioned above, you can always tweak your savings for income taxes and self-employment tax in the coming year.

{ 53 comments… read them below or add one }

Liz Mueller November 1, 2011 at 12:14 pm

Hi there- I have a question about how much I should charge for contract work given they will provide me with a 1099 and I will have to pay self-employment tax. We set my rate at $13/hr but if I want to at least walk away with $13/hr how much should I really charge- $16+ hr?

Thanks for your help!


mzumtaylor November 7, 2011 at 10:51 am

Hi Liz,

Sorry for the delay in response, but I was trying to find some research to back up my advice. I didn’t have much luck there, but this is what I would do in your position. Please keep in mind that I am not a financial adviser, nor an accountant or tax consultant. This is strictly my opinion.

I would say that your income tax rate is probably around 25% when you put together federal, state, and local taxes (if applicable). Add to that ~5% for “self-employed tax” (it may be more, but that’s a good bet). $13 + 30% is $16.90.

When you get paid for your 1099 work, you will get the full amount (at $13 an hour or $16 an hour, or whatever you decide to charge), so it will be up to you to put aside the 30% for taxes. You may have to pay a little more, but setting aside 30% is going give you a savings safety net that you will be thankful for come tax time. If you will be working as an independent contractor for this employer for a prolonged period of time, you might look into paying your taxes quarterly, which is something all long-term self-employed people (should) do.

The IRS website,, actually has some very helpful information on how that works, and if you call the IRS they’re more than happy to help you figure out how to pay your taxes correctly (it’s in their best interest to be friendly about it, too, which is great).

Hopefully that helps, and let me know if you have any further questions.



Kate June 20, 2012 at 3:16 pm


I was wondering if the 1099 form is the only difference between being an independent contractor or being self-employed. If so, then the 1099 form allows you to avoid the self-employment taxes. Also, I make far below the lowest tax bracket, could this affect anything in anyway?

Thanks for your help and advice,



mzumtaylor July 15, 2012 at 8:31 am

Hi Katie,

I’m sorry I don’t know the answer to your question. I hope to, in a few years, as I study to become an accountant. In the meantime, you should ask your question of an actual accountant. That person would be able to give you the information you’re looking for.

Good luck, and let me know if you have any other questions.


CJ August 6, 2014 at 1:55 pm


There is no difference between being an “independent contractor” and being “self-employed.” The difference comes when you get your 1099. Whether or not you have to pay “self-employment tax” depends on whether or not your “contractor” deducted taxes for you. What, and how much, tax you pay is dependent on what taxes show as deducted on your 1099.

If you are paid without a 1099, you are considered paid “under the table” or “cash-only.” What this means is it’s up to you to accurately tell the IRS how much money you made so that you can properly pay taxes on it.

If you don’t have a financial adviser, use TurboTax and get the Small Business edition. It will help you properly compute what you owe based on what you made. If you have a 1099, you just enter the numbers from your 1099 into it and it will tell you what you owe.

I would still use the advice from this article on how much money to set aside to pay your taxes at the end of the year if your “contractor” is not deducting any taxes for you. I’ve been hit by that “no taxes were deducted” thing several times, and if you’re not prepared, it will cost you a pretty penny on April 15th.


CJ August 6, 2014 at 1:59 pm

One more thing to note: It’s not illegal to be paid without a 1099. You can run a cash-only business and be perfectly legal, so long as you accurately account for what you made and you report it on your 1040. It *is* illegal to be paid without a 1099 and then fail to report that income on a tax return. That’s called “income tax evasion”. Don’t do that.


Erica Leeann July 31, 2012 at 12:07 pm

My boyfriend works as a driver and is 1099’d at the end of the year. This is his first job like this so we are lost when it comes to figuring out how much to take out of his checks for taxes. He gets paid biweekly and averages about $1300.00 every paycheck. He will be filing single. Can you please help us? Also, are we required to make quarterly tax payments, instead of just waiting till April? Thanks so much.


mzumtaylor August 1, 2012 at 10:48 am

Hi, Erica. Thanks for your comment/question. The first thing I would say is that you should talk to an accountant. An accountant would be able to give you the answers you’re looking for, and tell you exactly how much you have to pay in estimated taxes.

I sent you an email with a few estimated tax calculators that I found, as it seems likely that he’ll need to pay estimated taxes on his income. Let me know if you have any other questions that I might be able to help with.


Self Employed Tax Calculator November 28, 2012 at 6:02 pm

If you are both employed and self employed at the same time, or change from employment to self employment during the tax year, your tax liability can be quite complicated. Your employment income will have been taxed by your employer, but the amount of self employment tax and National Insurance you pay will be affected by how much you have already paid through normal employment.


Rosie April 13, 2013 at 2:22 pm

Holy cow! You’re awesome! My college-student son who lives in Denver, just got a new job that just made him an “independent contractor”. Happily he called me (his bookkeeper Mom) to rightfully ask me what does this mean? As I explained to him how his world just got turned upside down I told him I’d research what this means for him living in Colorado. since I live in Nevada. Found your site! You are now bookmarked, followed, liked and whatever other online stalky things I can do! Sending him a link now. Thanks!!!


mzumtaylor April 30, 2013 at 8:36 am

Thanks for the great comment, Rosie! Really made my day. :) Hopefully the information I posted was useful to your son. As I learn more on my journey to becoming a CPA, I hope to update this post to make it as accurate as possible.


Michael Townsend May 6, 2013 at 8:50 pm

I came across your website while googling 1099 info, and found that I have seen the light. The questions I have may be a bit more complicated for you. I currently travel in my truck to different job sites, and install satellite for a major tv company. I am wanting to know what exactly I can “write off”, and is there a limit to your write off”s. The reason I ask is that I have vehicle things (ie. Brakes, and Fuel, or mileage.) and then there are the tools, supplies, and the parts for the installation.(ie. cable, fittings, lag bolts, etc). Are these all write offs? and is there a limit to the amount to write off?

Thank You so much for the HUGE HELPFUL SITE.
Michael Townsend


C Ram May 28, 2013 at 6:41 pm

Making on an average of $125K a year and on a 1099. Would you suggest pulling taxes from each check into savings and wait until IRS gives payment amount or pay a quarterly amount?


mzumtaylor May 29, 2013 at 9:42 am

Since you don’t have taxes taken out by your employer, I believe you are required to pay a quarterly estimated amount, especially when you’re making 6 figures.


Mike June 18, 2013 at 8:02 pm

Great stuff, very helpful. Thank you!


Sarah August 21, 2013 at 1:26 pm

I’m a photographer in Colorado (for the last two years). I get paid by my clients, the money goes into my business bank account, and I spend it all on equipment/advertising. I’ve never actually paid myself an income because I also have a part time job (which I pay taxes on). Do I still pay estimated taxes AND self-employment tax on every cent I bring in through my photography, or is it only on what I (eventually) pay to myself?


mzumtaylor September 5, 2013 at 9:15 am

Hi Sarah,

I’m taking my tax class this semester, so please bear with me, but I believe that, if your photography gig is a business (you do it with the intent of making money), then you are supposed to pay estimated taxes on the money that photography generates for you. If the photography gig is a hobby (it has not been profitable in the last three of five years) then it’s treated differently for tax purposes.

As far as not paying yourself an income, if the photography gig is a business–unless you’ve incorporated–it’s treated as a sole proprietorship and your “salary,” so to speak, is whatever is left at the end of the year, after taxes and expenses. Does that make sense?

I would recommend talking to a CPA and asking them these questions. As much as I would love to know the answer(s), I still have several semesters to go before I even qualify to sit for the CPA exam, and I don’t want to steer you wrong.

Best of luck!


Paul Carlson September 4, 2013 at 7:52 pm

Thanks so much for collecting all of this info! I am apprenticing to be a self-employed tattoo artist, and trying to get this all figured out ahead of time! The self-employed tax bites pretty bad!


mzumtaylor September 5, 2013 at 8:58 am

The self-employed tax is just you acting as both the employer and the employee. The portion that you pay in the role of the employer can be deducted as a cost of doing business (although you might have to be itemizing your deductions in order for it to actually count).

But you’re welcome. :) I’m glad you found the post useful, and best of luck to you.


Jim April 3, 2014 at 5:25 pm

I’m not a CPA, which means nobody should give any credence whatsoever to anything I say here.

You don’t have to be itemizing deductions in order to deduct the employer portion of the self-employment tax. That’s a pretty fundamental point for this discussion.


Michael October 9, 2013 at 9:45 am

I am an independent contractor, working as a law clerk for a county government in Michigan. I take home $1700 bi-weekly, and no taxes are taken out of my checks (including social security, etc). I was not required to pay any taxes last year, so I assume that I do not have to pay estimated taxes. However, I would like to know how much I should be setting aside from each check to cover my taxes, social security, etc. Could you provide some insight as to how much that should be? I plan on filing as single, and I am not positive, but I don’t believe I will have any exemptions or deductions. Your help is greatly appreciated.


Jess October 23, 2013 at 12:17 pm


I just got hired by an company as a freelance graphic designer. I was required to fill out a W9 form. I get paid 20hr 40 hrs a week. I’m not sure how much I should be putting aside from each check for taxes and when I should pay them



Claudia November 3, 2013 at 11:29 am

Hi, this site really helped! But I have a few more questions I pray your expertise will shed some light on.
i am being offered $53 per hour (106k/yr if assuming 2 weeks vaca) to work as an independent contractor Physician Assistant.
1) My research thus far reveals the current tax rate for NY is 15.3% of my net. I do not know how to calculate my net. Here is how I arrived at the aforementioned:
The self-employment tax is the combined Social Security and Medicare taxes due on net self-employment income. The Medicare tax is a flat tax at a rate of 2.9% on all compensation income. The Social Security tax is a flat 12.4% of all compensation income, up to a maximum compensation amount of $106,800. (12.4 + 2.9=15.3)
2) I live in CT and I know I have to pay taxes for both states (NY job and CT resident) but I do not know how much
3) when I lookup my tax bracket and state tax, do I look under CT or NY?
Thank you.
Please reply to


David Moore November 4, 2013 at 2:29 am

Hi. I recently got hired as a Delivery Driver for a company that people order from online and I deliver the items. They don’t take out any taxes, would I be subjected to paying the self employment tax or just the 15% tax bracket and state tax for CA. I make about 1200 on average bi-weekly.


mzumtaylor November 4, 2013 at 8:27 am

Hi David,

Since your employer doesn’t take out taxes from your paycheck, it sounds like you are a 1099 employee. If you are a 1099 employee (a contract worker) instead of a W-2 employee, you will have to pay the self-employment tax, which is 15.2% of your income. You will also have to set aside money from each paycheck to pay your taxes, and I believe that you should pay your taxes quarterly. If you aren’t sure what any of that means, drop me a line and I’ll do my best to explain. You might also contact a CPA, if you know one, because they will be able to answer your questions very thoroughly. I’m only a CPA-in-training, but I will help you to the extent that I can.


Phillip Arnez November 7, 2013 at 11:50 am

What can I deduct as a 1099 contractor?


mzumtaylor November 19, 2013 at 8:51 pm

That is a very complicated question and depends on what kind of business you’re in, and what your expenses look like. I would highly recommend talking to a CPA.


Steve November 12, 2013 at 10:48 am

Hi Liz,

I am an independent contractor and will make about $40,000 this year. Since i haven’t been taxed on this amount how much should i expect to pay in taxes total.

What are some write-offs i can use? I use my cell phone for work, lease a car (travel a lot for work), take clients out for lunch/dinner. Are these all write-off elgible.. what else?



mzumtaylor November 19, 2013 at 8:49 pm

Hi Steve,

It’s hard to know for sure how much you’ll be taxed, and what you can write-off. As an independent contractor, you’re responsible for paying both the employer and employee portion of Medicaid and Social Security (15.3%, total), as well as your federal, state, and local (if applicable) income taxes. The tables for the income tax brackets can be found on the IRS website (for federal) and your state’s revenue service website.

As far as write-offs are concerned, that’s entirely dependent on the type of business you’re in, what you’re expenses look like this year, and what you’ve been reimbursed for by your employer (if anything). I will say that when you take clients out for meals/entertainment, only 50% of those expenses are deductible (unless you’re a pilot, in which case the rules are completely different). As for your cell phone and your lease car, it’s possible that those expenses are deductible, but to be sure, I would consult with a CPA. I wish I could help you there, but I’m still just a CPA-in-training.

I hope that helped, and let me know if there’s anything else I can help you with.



Anna November 14, 2013 at 11:53 pm

Hi there,
I’m very confused about my situation. I work for a lady who owns her own business (an eBay online store) and she hired me as an “independent contractor”. I don’t supply anything but I work like a normal person works, 9-5 job and be managed. I sound like I should be filling out a w2 but she says I need to fill out a 1099, I make about $2k a month and have been working for them since the middle of Sept. What do I do? This is the first job I’ve ever had where I have to fill out a 1099 form. Is there a way she can take money out of my paychecks that way I don’t have to pay it all back? I’m also in college so I thought this would be a cool job to have which it is but I’m just worried about paying for my taxes next year and how I’m going to do it.


Aaron July 4, 2015 at 3:32 pm

Anna, you should look into what defines an independent contractor because its my understanding that if they are supplying the office and tools for your job you are to be designated as an employee. If you’re not bordering minimum wage I would just figure your new hourly and see if it still works for the value you bring.


Teri April 15, 2014 at 10:57 pm

I just wanted to thank you for the info you have listed here. It was helpful. Especially the calculators. I have an interview tomorrow and they want to pay me as an independent contractor. After using the information form here and calculating tax percentages, I feel confident on what I am going in and asking for.

Thanks again,



Julie January 7, 2015 at 3:23 pm

Thank you so much for this. It really helps me! I am a single mom with a home child care earning around 24 or $25000 a year. It is so hard knowing how much to save for taxes and how to budget, and how to save for retirement, etc , etc. Thank you . This really helps.


Andrew Prancing Pine Keeler March 31, 2015 at 4:03 pm

Thank you so much for your time and efforts on this. The material really simplified things for me.

I have a couple questions. The link for the State Income Tax calculator looks like it’s for sales tax, am I being mislead or taken to an incorrect link?

And I’d take my deductions out first before adding my “taxable” income into the calculator, correct?


mzumtaylor January 8, 2016 at 1:16 pm

You’re welcome. I’m glad you found it useful. And yes, in the intervening years, the page I had originally linked to had changed. I have since updated it.


Hestia April 16, 2015 at 4:07 pm

This is great information; I’m so glad I found it. My son works for a guy who is self-employed repairman. He is paying my son $11/hour with no taxes taken out and leaves it up to my son to let him know if he wants to file a 1099 or not. As my son lives paycheck to paycheck, he does not put away for taxes. My question is this. My son’s ’employer’ tells him, he’s actually making $15/hour because there’s no taxes being taken out. I disagree, I say his hourly wage is closer to $8/hour (when he starts taking money out for taxes). We live in CO, I’m calculating a 25% tax bracket as a combined FED/State). I feel he’s taking advantage of my son’s immaturity.

thank you for your insight.


mzumtaylor January 8, 2016 at 1:13 pm

You may be right. If he’s paying your son $11/hour and not withholding taxes for him, then your son is effectively making less than the $11/hour that the guy is paying him, because he has to pay his own taxes.


Chris June 4, 2015 at 8:30 am

Hey there,

Your calculation of federal taxes in nearly every example is inaccurate. To put it simply, the IRS applies marginal taxes.

To explain this further, your example of federal taxes on an individual making $16,000 annually is overstating the amount needed to save to pay their tax obligation. You are correct in the fact that they’re firmly in the 15% tax bracket. However, the first $9,225 of income is taxed at 10%, while the remaining $6,775 is taxed at 15%.

Using your calculations, an individual would carry a federal tax liability of $2,400 as opposed to $1,939 (calculated correctly).

I hope this helps.


mzumtaylor January 8, 2016 at 1:15 pm

You are right, Chris. My calculation is too high because I am using the tax bracket rate instead of the marginal tax rate. Although it is less accurate, I found have found that using the tax bracket rate is easier for most people to understand, and saving a little extra isn’t the end of the world. But your comment is a good reminder that the tax bracket rate results in more tax savings than most people probably need, and if someone is opposed to getting a (large) refund they should use their marginal tax rate for saving instead.


Valencia Bosque June 27, 2015 at 10:41 am

My husband starting working for his friend who is a flooring installation contractor. He pays my husband $12.00 an hour, however pays him with a check and no taxes taken out. We live in Florida where we pay no state taxes, only federal taxes. Does he need to start saving at least 15% of his weekly pay for taxes? Is he required to pay estimated taxes or can this just be completed when we file our taxes. We don’t know what to do.


mzumtaylor January 8, 2016 at 1:11 pm

If he is going to make enough to owe more than $1,000 in federal taxes, you should set aside money from each check to pay taxes.


Ashley August 8, 2015 at 6:59 pm


How does social security fit into this? Is it part of federal taxes? Right now my employer only takes out 8.5% a paycheck for social security, so would I still need to save 15% (assuming I make $28,000) on top of that for federal taxes?



mzumtaylor January 8, 2016 at 1:09 pm

If you have an employer who is withholding social security on your behalf, you probably don’t need to worry about paying taxes because you are probably not considered self-employed or a contract employee.


Jes September 12, 2015 at 12:02 am

I recently got a job as a server at a restaurant and received a check stub with taxes deducted, but I didn’t fill out or sign a W-2. Is it illegal that taxes were deducted when I never signed anything?


mzumtaylor January 8, 2016 at 12:49 pm

You should have filled out a W-4 when you started working. They should have a copy of it on file.


Eliza November 16, 2015 at 2:23 pm

Someone told me if you plan to owe more than $1,000 in taxes, then you have to pay quarterly. Is this true? What if you sign up to pay quarterly, based on your calculations above (15.3%, plus the state rate, plus the fed rate based on income), and the amount actually owed is less. Will they send you the money back? Also, I heard that half of that 15.3% can be deducted as a business expense when filing taxes. Is this true? Thank you.


mzumtaylor January 8, 2016 at 12:43 pm

I updated this blog post to answer many of these questions, but I will respond here as well.

Yes, if you expect to owe more than $1,000, it is recommended that you pay quarterly.
For how much you should pay in estimated taxes, I highly recommend reading this article from They spell it out well, and make it pretty easy to understand.
If you overpay your estimated taxes, you will get a refund. It’s exactly like over-withholding if you are an employee. If you over-withhold, you will get a large(r) refund.
It’s less than half of the 15.3% is deducted as a business expense, and more than you don’t get taxed on it. It goes on the first page of your 1040 (tax return), and reduces your AGI.

Hopefully that helps.


Shannon November 24, 2015 at 7:58 pm

I have just become a 1099 independent contractor and am trying to figure this all out before I receive my 2nd paycheck (I am giving myself a month basically to get this all worked out).

So I just want to kind of confirm some of the information from what I have been researching/reading when I came across your webpage (which seems to be super great for explaining!)

I live in MI. I was just hired as a social services visitation coach (As of Nov 1, 2015) and will be on a 1099. So, from the information you have given and other sources, the federal tax rate I would go by is a withholding percentage of 10% (I lived outside the U.S. until mid-Oct when I moved back) and in MI, the state tax is 4.25%. I am claiming no exemptions now. So, if I have this correct, I would need to save at least 15% of my total income from each paycheck in order to pay any taxes for the 2016 year (or at least, for the last quarter of 2015). But as you said, it is better to round up. Does this sound about right?

The other thing is, does that 10% (or in general, the federal withholding tax rate) include the FICA and Social Security or is that separate? I am confused regarding that… Please correct me in anything I am wrong…

Thanks in advance for any information.


mzumtaylor January 8, 2016 at 12:38 pm


I updated this page, which should answer some of your questions. You calculations appear to be correct. If you are making (or estimate that you will make) more than $10,000, you should probably save around 19.25% for your federal and state taxes.

As far as “Self-Employment Tax” is concerned, I would at least set aside the 7.65% (6.2% for Social security and 1.45%) that you will be responsible for in the end. The calculation of how much of the full 15.3% you as a self-employed person are actually responsible for is complicated, but 7.65% will most likely suffice.


jennifer mahern December 2, 2015 at 1:39 pm

Please help if you can! I am so utterly confused. I have worked part of the year in two separate perm full time jobs, part getting unemployment and part supplementing my income with independent contractor work. I am so confused as to what amount I need to send to the government for estimated taxes come january for my contractor work. I have made about 28,000 as employee and with unemployement. I will have made about $4522 in contract work. I estimated the self employment with the 104-ES worksheet and that comes to about $550, I think my state tax is essentially 3.3% and that comes to $150 (although I work in Indiana the company I work for is in WA state so I am not sure how taxes work with this situation). I am not sure how to calculate my tax bracket. do I calulate it based solely on my contractor income or do I have to add all other income to it? It would be 10% alone and 15% without. I am going crazy because if it is 15% then I will end up owing almost everything I have saved from having the extra job. Can you help me at all?


mzumtaylor January 8, 2016 at 12:30 pm


You may not need to make an estimated payment, but you may owe more in taxes than you had withheld from your two jobs and unemployment. Given that, I would recommend setting aside the $700 ($550+$150) that you estimated you might owe. If you don’t owe it, you can use that savings for something else, but having it will keep you from scrambling if you do get a tax bill.

As far working for a company in WA while living in IN, typically you owe taxes in the state in which you lived while performing the work, especially as an independent contractor. If you are still unsure, I would highly recommend seeking out a CPA to do your taxes this year. That way you know that everything is done correctly and you don’t have to stress about missing a tax form or deduction.


Michael December 10, 2015 at 1:09 pm

I realize this is a very old post, but I feel it’s important to point out that the link provided links to a *sales* tax calculator, which is very different than an income tax calculator! Perhaps there used to be an income tax calculator there and it changed sometime in the past few years.


mzumtaylor January 8, 2016 at 12:26 pm

Thanks, Michael. I have updated the link to point to a state income tax calculator.


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