Tax Year 2025

1099 vs W-2: how does the tax bill differ?

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A 1099 and a W-2 aren't just different paperwork — they represent two fundamentally different tax situations. As a W-2 employee, your employer withholds income tax and pays half your Social Security and Medicare tax automatically. As a 1099 contractor, nothing is withheld, you owe both halves of that payroll tax yourself, and you're responsible for sending the IRS money throughout the year instead of waiting for one bill in April. The trade-off is real: 1099 work generally means a bigger total tax bill on the same gross pay, but also real, uniquely available deductions a W-2 employee simply doesn't get.

The same $90,000, two different tax bills

	W-2 employee	1099 self-employed (no expenses)
Payroll/self-employment tax	Employer pays half automatically	$12,717 owed by you, both halves
Total tax for the year	$11,255	$19,582

The 1099 total is higher here mainly because self-employment tax (15.3% of 92.35% of net profit) doesn't exist for W-2 wages at all - the employer already paid its half, and payroll withholding covers the employee's half automatically. Real 1099 work usually has deductible business expenses that reduce net profit and narrow this gap; this example has none, to isolate the tax-treatment difference itself.