W-2 Employee vs 1099 Contractor
This tool compares the same pay as a W-2 employee and as a 1099 contractor. It shows who pays the 7.65% employer share of social security and Medicare.
An employer withholds and pays half of social security and Medicare. A contractor pays both halves through SE tax.
Estimate only. Leaves out the additional 0.9% Medicare tax, credits, deductions other than the SE-tax half, and state tax.
Worked example
Take $60,000 of pay. As a W-2 employee, the employer pays 7.65% (about $4,590) and the worker pays the other 7.65% through withholding. As a 1099 contractor with $60,000 net profit, net earnings are $60,000 x 92.35% = $55,410. SE tax is about $55,410 x 15.3% = $8,478, so the contractor carries both halves. The employer-equivalent half (about $4,239) is deductible in figuring AGI, which affects income tax only.
Common mistakes
Comparing gross pay without the employer share. Treating the deduction as a refund; it lowers AGI, not the SE tax itself. Missing that card and app payments are reported by the processor, not on your 1099-NEC.
Records to keep
Keep the pay figures you compared, any W-2s, and your 1099 records. Note which payments came by card or app so the reporting source is clear.
- IRS: Self-employment tax (Social Security and Medicare taxes)
- IRS: Form 1099-NEC and independent contractors
Questions
Who pays the 7.65% employer share?
An employer pays it for W-2 workers. A 1099 contractor pays both halves through SE tax.
Does the half deduction cancel the SE tax?
No. It is deductible in figuring AGI and affects income tax only.
Are card payments on a 1099-NEC?
No. Card and app payments are reported by the processor, not on your 1099-NEC.
Data checked 2026-10-31 against the linked irs.gov pages.