1099 Tax Calculator

The gig economy seems to be the new way of the world. More people than ever are freelancing, earning side income, and becoming small business owners.

After all, isn't that why you're using this calculator? You — and thousands of taxpayers like you — are learning how to navigate 1099 taxes. And that starts with figuring out how much self-employment tax you have to pay.

What does it mean to have 1099 income? 

Any income that’s reported on a 1099-NEC or 1099–K is considered “self-employment income.”

Self-employment income is just code for “non-W-2.” It can come from running a small business, freelancing, or just working a casual side hustle.

When you work as a standard employee, your employer automatically withholds your income and FICA taxes (Social Security taxes and Medicare taxes) and pays them to the IRS.

Self-employed individuals, on the other hand, have to calculate and pay these taxes themselves. 

Paying taxes as a 1099 worker

As a 1099 earner, you’ll have to deal with self-employment tax, which is basically just how you pay FICA taxes. The combined tax rate is 15.3%.

Normally, the 15.3% rate is split half-and-half between employers and employees. But since independent contractors and sole proprietors don’t have separate employers, they’re on the hook for the full amount. (To get a sense of how this might impact your taxes, take a look at this 1099 vs. W-2 calculator, which compares your take-home pay from both types of work.)

If you’d like more information on why things work this way, check out our beginner’s guide to self-employment tax.

But for now, think of self-employment tax as those double-pop popsicles. It can be split between two people, but it comes in a single package. There’s no way to avoid paying for both sticks even if it’s just you.

Here's some good news, though: Only your net earnings are subject to self-employment taxes. That’s your gross income minus your business write-offs. (More on this later!) 

Income tax vs. self-employment tax: Why you owe both

Many freelancers are surprised to learn they have to pay multiple types of taxes on their return. It seems like it should be an either/or tax situation, right?

Wrong.

Self-employed individuals have to pay both income tax and self-employment taxes.

So what’s the difference? In short, your income tax is assessed on your total income for the year, whereas self-employment tax is assessed on your business income for the year.

Your income tax can be reduced through adjustments (like for self-employed health insurance), the standard deduction or itemized deductions, and tax credits.

Your self-employment tax, on the other hand, can only be reduced through business write-offs and tax credits. 

How to pay your 1099 taxes

If you think you might owe more than $1,000 in federal income taxes, you should be making payments throughout the year — not just when you file your return.

These additional payments are referred to as “quarterly” or “estimated” tax payments. You pay your quarterly taxes on the 15th day following the end of the quarter.

For example, let’s say you expect to owe $2,000 in taxes. You would divide that amount by four and make your quarterly tax payments on the following schedule:

We haven’t gotten into all the nitty-gritty here — like the forms that are involved in the filing process. If you’re interested in more details, check out our blog post on how to pay self-employment taxes step by step.

The 3 best ways to lower self-employment tax

Now for the fun part — lowering your tax bill! As I mentioned earlier, the only way to effectively reduce self-employment taxes is to lower your net income.

Here are the three best ways to avoid paying extra taxes on your 1099 income: 

Tip #1: Don’t miss your business write-offs

Most write-offs are missed because people don’t keep track of what they buy for work. In the frenzy to pull everything together before taxes are due, eligible write-offs tend to fall through the cracks. 

Do yourself a favor and start keeping up with your expenses now. More of your purchases count as business expenses than you might realize, and they could significantly lower your taxable income. Here are a few examples of business tax deductions you can take: 

• 📶 Your cell phone and internet bill
• 🚗 Work-related parking fees and toll passes 
• 💻 Software subscriptions (such as Office 365)
• 💳 Bank and credit card fees on accounts you use for work
• 🔌 Computers and electronic accessories (chargers, adapter cables, etc.)
• 💻 Platform fees, from Shopify to Patreon
  

If you’re wondering where to start with this, you’ve come to the right place. The Keeper app is specifically designed for gig and freelance workers in the United States.

The app will find and sort all of your business write-offs automatically.  When you’re ready to file, all you have to do is upload your 1099s and we’ll handle the rest. 

Tip #2: Consider deferring your business income

This isn’t a feasible option for everyone. (Rideshare or delivery drivers, for example, are locked into a relatively inflexible payment schedule.) But for those of you who invoice clients, consider delaying your December invoicing until the New Year.

Here’s why: A payment you receive on December 31st has to be reported on your tax return by the following April. However, a payment you get on January 1st doesn’t have to be reported until April of the following year. That’s 11 extra months!

For example, if your business rent is due January 5, pay it December 30. This will allow you to claim more deductions in the current tax year— essentially borrowing from next year’s write-offs.

Delaying your income by just a few days can give you lots of extra breathing room to plan for taxes. 

Tip #3: Prepay your work expenses

If you know you’re in for a painful tax bill, this strategy could help.

Here’s how it works: rather than waiting till January to pay your regularly scheduled bills, pay them in December instead.

If you’re going to use this strategy, it’s important to look ahead first. Here are some scenarios where prepaying could be a beneficial move and help you save money overall: 

• You owe a sizable tax bill and haven’t made any estimated payments.
  In this situation, reducing your tax liability by prepaying expenses is a good idea. The lower your tax liability, the less you’ll pay in underpayment penalties and interest. 
• You don’t expect to have much — or any — self-employment income next year.
  People change jobs and hop careers all the time. If you expect a major change to the type of income you’re earning, it’s probably worthwhile to maximize your write-offs now. 
• You expect to have more tax-saving opportunities next year.
  If you recall, only two things can lower self-employment tax: business write-offs and tax credits. So for example, if you plan to enroll in college, you’ll have a sizable tax credit to play with. In that case, borrowing from next year’s write-offs probably won’t hurt you. 

You can’t write off an expense that’s more than 12 months away, but this strategy can still give you a bit of much-needed wiggle room during stressful years.

At the end of the day, Keeper has your back. We’re your cheerleader, quarterback, and defensive lineman all rolled into one. Keep using our free tools like this one, and download the app today. Let us help you score a tax refund.

1099 tax glossary

1099

A 1099 form is a type of form used to report payments that aren’t from a W-2 employer. There are many different types of 1099 form, including, but but limited to:

• 1099-NEC
• 1099-K
• 1099-MISC
• 1099-B

1099-K

A 1099-K form is used to report payments received through third-party network transactions, such as those made by credit card or via online payment services like PayPal and Venmo. 

For the 2024 tax year, individuals who received $5,000 or more on one of these platforms will receive a 1099-K. In future years, the IRS plans to implement a threshold of $600 across any number of transactions — the $5,000 figure is intended as a “phase-in.”

1099-NEC

A 1099-NEC form is a type of 1099 form that reports “nonemployee compensation” to the IRS. If you’re an independent contractor for a client during the year and make over $600 across any number of payments, you should receive a 1099-NEC from that client.

1099-B

A 1099-B form reports proceeds from broker and barter exchange transactions to the IRS. This includes the sale of stocks, bonds, and other securities. You might be familiar with this form if you trade on Robinhood, for example.

Audit

In the tax world, an audit is an IRS review of someone’s financial records to make sure their tax return is accurate. An audit can be random or it can be triggered by a red flag on the return you file. Don’t worry too much, though: Less than 1% of all U.S. tax returns get audited by the IRS. 

FICA

FICA stands for the Federal Insurance Contributions Act, and is a tax all working Americans pay. It’s actually comprised of two taxes — Social Security and Medicare — and all earned income is subject to it. 

W-2 employees have FICA automatically deducted from their paycheck, but self-employed workers must pay it themselves. And while W-2 employers and their employees split the tax (7.65% and 7.65%), self-employed people are on the hook for the whole 15.3%.

Income tax

Income tax is a tax imposed on individuals and businesses based on their earnings or income. It is typically progressive, meaning the rate increases as the amount of taxable income increases.

Independent contractor

An independent contractor is a self-employed worker who does gigs for clients, but is not their employee. Independent contractors report their income using Form Schedule C.

IRS

The IRS is the Internal Revenue Service, the U.S. government agency that collects federal taxes, conducts audits, and enforces tax law.

“Ordinary and necessary”

Business expenses that the IRS considers “ordinary and necessary” are both common for your industry and helpful for your business’s function. If you’re a 1099 worker, you’ll be able to write these business expenses off on your taxes.

Quarterly taxes

Quarterly taxes are estimated tax payments that many self-employed individuals must make at regular intervals throughout the year. Quarterly tax payments are due on:

• April 15
• June 15
• September 15
• January 15 of the next year

Schedule C

Schedule C is a form used to report self-employment income on a personal tax return.

Schedule SE

Schedule SE is a form used to calculate the tax due on self-employment income.

Self-employment tax

Self-employment tax covers your Medicare and Social Security tax obligations as a self-employed worker.

Side hustle

A side hustle is 1099 work done in addition to a W-2 job. For example, if you work a 9-5 job as a marketing coordinator but run an Etsy shop in your spare time, that Etsy shop is a side hustle. (Sorry, you’ll still have to pay taxes on both sources of income.)

Sole proprietor

A sole proprietor is an individual who runs a business solo, without any formal legal structure. This person is also personally responsible for all business debts and liabilities.

Tax deduction

A tax deduction (also called a tax write-off) is an expense you can subtract from your taxable income. A lower taxable income means a smaller tax bill! Examples of tax deductions include:

• Eligible business expenses
• Student loan interest
• Charitable donations

Tax credit

Like a tax deduction, a tax credit is a tax incentive. However, a tax credit directly lowers the amount of tax you owe instead of lowering your taxable income.

Tax rate

A tax rate is the percentage at which an individual or business’s income is taxed. Depending on the system, it can be progressive, regressive, or proportional:

• Progressive tax rate: Tax rate increases with income
• Regressive tax rate: Everyone pays the same dollar amount, regardless of income
• Proportional tax rate: Everyone is assessed the same tax rate, regardless of income

Tax write-off

A tax write-off is another name for a tax deduction.

W-2

The W-2 form is issued by employers to employees and details wages earned and taxes withheld during the year. Employees use this form to file their annual tax returns.

W-4

The W-4 is a form filled out by an employee at the beginning of a job to let the employer know how much tax should be withheld from each paycheck.