Which form do you get most taxes taken off? 1040A or the 1099 where you have to report everything on your own?

Question

I wanted to know if I get paid for example 40,000 at a company where the taxes get taken out of my paycheck directly do I get more taken out than if I was just reporting my gross income from a private contractor?

In other words? Is the 1040A form better than 1099 (is that what it is called - the one where you just show your money at the end of the year)?

I know that 1099 or the gross that you show at the end of the year, you can write off more expenses.

Please advise.

Answer 1

There is no money taken from a 1099. You have to pay your own taxes, medicare, ss, etc.

Answer 2

Here are some fast and dirty numbers. Only the Federal taxes are taken into consideration as it would have little if any effect on your State taxes. It also assumes that the $40k on the "1099 job" is net of all deductible expenses.

W-2 Job

Gross: $40,000

FIT: $4,296

FICA: $2,480

Medicare: $580

Net: $32,644

Self employed (aka 1099 Job)

Gross: $40,000

FIT: $3,872

SE Tax: $5,652

Net: $30,476

Cost of "1099 Job" $2,168

This does not take into account the fact that when you are self-employed you are not eligible for unemployment, won't have any fringe benefits such as health insurance, vacation pay, sick pay, etc. nor will you be covered by worker's compensation if you should be injured on the job. When you add the costs of private insurance for those items (or additional income needed to provide for savings for those things) you would generally want to double your gross earnings as a self-employed individual vs being paid as an employee. So, if an employer tries to tempt you with a 10% "kicker" to "go 1099," tell them to eat rocks if they aren't willing to pay you DOUBLE.

Answer 3

You really do need to sit down with a good tax professional to discuss this.

The problem with being an independent contractor is you have to pay not only your income tax but also both halves of Social Sec. & Medicare Taxes.  There is no withholding so unless you are very self-disciplined and save the appropriate amount each payday and send it to IRS four times a year, you are just asking for a horrible situation when you file your taxes.