Lesson · 8 min
W-2 vs. 1099
Employee vs. contractor — and why it matters at tax time.
A W-2 employee has taxes withheld automatically. A 1099 contractor is paid gross and owes both halves of FICA plus quarterly estimated taxes. Freelancers should set aside 25–30% of every payment.
Vocab
- 1099-NEC
- The form that reports contractor income of $600+.
Quick check
1. A 1099 contractor should set aside about…