Why do freelancers pay 15.3% instead of 7.65%?
Employees split FICA with their employer. As a 1099 contractor you are both, so you pay both halves — though you deduct the employer half from taxable income.
Estimate your self-employment tax, federal income tax, QBI deduction, and the four quarterly payments you owe as a 1099 contractor.
SE taxable base = Net profit × 0.9235. SE tax = base × 15.3% (Social Security portion capped at the annual wage base). Taxable income = Net profit − ½ SE tax − QBI deduction − standard deduction. Quarterly payment = Total tax ÷ 4.
Net profit of $90,000: SE base = $83,115, SE tax = $12,717. Deduct half ($6,358) plus a ~20% QBI deduction and the standard deduction, leaving roughly $59,000 taxable — about $7,900 federal income tax. Total ≈ $20,600, or ~$5,150 per quarter.
Employees split FICA with their employer. As a 1099 contractor you are both, so you pay both halves — though you deduct the employer half from taxable income.
Yes, if you expect to owe $1,000 or more. Due 15 April, 15 June, 15 September, and 15 January. Missing them triggers an underpayment penalty charged as interest.
Pay 100% of last year's total tax (110% if your AGI exceeded $150,000) and the IRS waives the underpayment penalty no matter how much more you earn this year.
Section 199A lets most pass-through businesses deduct up to 20% of qualified business income, subject to income thresholds and service-business phase-outs. It reduces income tax but never SE tax.
Ordinary and necessary business costs: home office (simplified $5/sq ft up to 300 sq ft), health insurance premiums, software, mileage at the standard rate, half of business meals, and SEP-IRA or Solo 401(k) contributions. These reduce both income tax and SE tax.
Usually worth modelling once net profit exceeds about $80,000. You pay yourself a reasonable W-2 salary and take the rest as distributions exempt from SE tax — against $1,500–$3,000/year in payroll and filing costs.