You don't need to make an estimated tax payment🍹
The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).
Whether you're a freelancer, 1099 contractor, small business owner, or any other type of self-employed worker, your independent contractor taxes are going to be a bit more complicated (and maybe even scary!) than you might expect.
Unlike for salaried jobs, with your filing status, taxes aren't automatically withheld from your self-employment income pay stubs throughout the year. That means you're probably not getting a tax refund, and will instead owe the government money when you file your tax return.
The biggest reason why filing a 1099-MISC can catch people off guard is because of the 15.3% self-employment tax. The 1099 tax rate consists of two parts: 12.4% for social security tax and 2.9% for Medicare. The self-employment tax applies evenly to everyone, regardless of your income bracket. For W-2 employees, most of this is covered by your employer, but not for the self-employed!
Don't feel so intimidated by your tax liability after using our free 1099 taxes calculator. In the next section, we'll show you how you can reduce your tax bill with deductible expenses.
Using a self employment expense tracker and finding tax deductions are critical to reducing your tax bill. From car expenses, to home office and software -- there's a good chance you can knock a few thousand bucks off your tax bill if you're smart about claiming write-offs.
Check out our self-employment tax deductions explorer for a complete list of all the different kinds of write-offs you might be eligible for, based on the type of work you do.
Note: The calculation above doesn't take tax deductions into account - if you want to see your tax bill after deductions, just subtract your annual business expenses from your 1099 income input field.
If you expect to owe more than $1,000 on taxes, then you should be making quarterly estimated tax payments. This basically means you need to pay a portion of your expected tax bill four times per year, instead of all at the end of the tax year.
Feel free to use our free quarterly tax calculator to calculate exactly how much you should be paying (both Federal, and State!). You'll also find detailed instructions for how to pay quarterly taxes on the same page.