How do you calculate taxes if you are a 1099 employee?

Answer 1

The details are important in these things! If you are paid on a 1099, you are NOT an employee. You are an independent contractor. Basically, in all ways, you are running your own business and are hired by the company paying you. Many things not deductible to an employee may now be to you, as legitimate business expenses. See Schedule C (and instructions) of the form 1040 to get a better idea. On the other hand, many of the things an employer handles for and even pays for an employee, you do not get the benefit of. Mainly, their paying half og the FICA premium (or @7.65% of your earnings), that you will now pay, and no unemployment coverage, etc. Your taxes are calculated on your annual Form 1040 filing (the return), and as noted above, may now be a little more complex to get all the benefits. One thing employers must do for employees is payroll withholding of estimated taxes (along with the FICA and such noted above). Not being an employee, they simply pay you like any other vendor or supplier (you are a service provider). However, (because it isn't handled for you by withholding) you are required to make QUARTERLY estimated payments using a Form 1040 ES. You want to send in an accurate estimate so you don't have to pay any penalty or interest when you actually determine the exact amount due with the return. See the instructions of how to do so here: http://www.irs.gov/publications/p505/index.html