How this number is made
The same dollars are worth less as a 1099 because you pay both halves of Social Security and Medicare. This comparison gives the employee the employee share of FICA and gives the contractor the self-employment tax, then federal income tax after the standard deduction. No benefits, no expenses, no QBI deduction.
- Gross is the salary or the profit before expenses. If you have real expenses, the 1099 page is the better tool.
- State tax is a flat percent of gross for the employee and of profit for the contractor. Here they are the same gross.
Formula
W-2 net = gross − federal tax on (gross − standard deduction) − employee FICA − state percent. Contractor net uses self-employment tax and the federal tax after the deductible half of that tax.
Worked example
With the figures already in the form, w-2 keeps this much more is $4,432.77.
Questions
Where are health insurance and the match?
Not here. A W-2 job that pays benefits is worth more than the cash difference. A contractor who deducts health insurance and expenses needs the 1099 page.
Why might the contractor’s income tax be lower?
Half of self-employment tax is deducted before the income tax. That does not offset the extra payroll tax. Look at the net, not at one line.