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 to simplify this explanation 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:

Personal Example: I currently live in Colorado, and make $25,000 a year. Because Colorado taxes by state, county, city, AND county district, it seems a little complicated, but the bottom line is my state tax bracket is 8.06%. (See the calculator above, because even I don’t necessarily want to do this math.)

When I lived in Michigan, they only tax at the state level, which for $25,000 is 6%.

Put together, my total income tax is 23.06%.

In any case, once you know what your tax bracket is, you know how much you have to save.

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 7% 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 22% of that income, and put it in a savings account. And if you want to make your life easier, 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 ING Direct because they earn more than 1% interest, but the savings account at your bank is just fine if it means you’ll start savings now instead of tomorrow or next week.

Paying Taxes When the Times Comes

You’re dutifully putting 22% (or 25%, or whatever percent) of your income in savings each time you get a paycheck, and you’re watching the balance grow (which is exiting). Between now and April 15th, you just have leave the money there. Really, it’s your safety net.

Then, once you file your taxes, the government will let you know how much you owe them (which could be a lot if you worked almost exclusively for yourself or as an independent contractor) and then you will be very glad you saved all that money.

A (sort of) Personal Example: My step-brother, who works as a server, found out last year that he owed the government almost $2,000. I don’t know all the details of why he owed so much money, but he had no idea that he was going to owe anything either and therefore hadn’t saved. When he got his notice from the government, he was scrambling to pay it by the deadline, and ended up borrowing money from his father, whom he is now repaying.

If You’re Self-Employed

Those of you (us?) who are self-employed (i.e., no one takes any money out of your income for taxes), and make a bulk of your living that way, you 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 take this out of your paychecks each month, but since you employ yourself, you’ve got to do it.

That means that instead of saving 25% of your earnings (adjusted of course for your personal tax bracket), you’d have to save 40%. That seems like an awful lot, and it is. And there is a chance that you won’t owe the government nearly that much, so you might be tempted just to spend the money and deal with what you do owe when the time comes, but you’re much, much better off having the money and not needing it, than needing it and not having it.

Estimated Taxes and Quarterly Payments

I could also get into making quarterly payments of your estimated taxes to the government, but that likely applies to only a few of you, and I’m not sure I entirely understand it. I’ve never had a year where I’ve made even a quarter of my income from independent contract work / self-employed work (although I’m hoping that will change) so I’ve never had to figure it out. But if anyone wants to know, and doesn’t want to do the research, let me know and I’ll be happy to figure it out.

{ 24 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.


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.


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.


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.


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.


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