Money · Taxes for regular people

W-2 vs. 1099

On a W-2 you're an employee: taxes come out of every check and your employer pays half of Social Security and Medicare. On a 1099 you're self-employed: nothing comes out, you owe 15.3% self-employment tax on top of income tax, and you may need to pay four times a year.

Moderate20 minFreeChecked October 3, 2026

You'll need

Your offer letter or contract
A separate savings account for tax money if you're paid on a 1099
Records of what you earn and spend for the work

What to know

Know what each form means. An employer generally withholds income tax, Social Security and Medicare from an employee's wages, pays a matching share, and pays unemployment tax. For an independent contractor, a business generally withholds nothing. Source: IRS¹
Know the self-employment tax. It's 15.3%: 12.4% for Social Security and 2.9% for Medicare. You can deduct the employer-equivalent half when you figure your adjusted gross income. Source: IRS²
Know when you must file. If you have $400 or more in net earnings from self-employment, including gig work and side jobs, you must file a tax return. Source: IRS³
Set money aside from every payment. Nobody is withholding for you. A separate savings account for tax money keeps it from getting spent. If you expect to owe $1,000 or more when you file, you generally have to make estimated payments. Source: IRS⁴
Put the estimated tax dates on your calendar: April 15, June 15, September 15 and January 15 of the next year. For example, 2026's last payment is due January 15, 2027. Source: IRS⁵
Report all of it. You must report all your gig income, even if no business sends you a 1099. Source: IRS³ Payment apps and online marketplaces send a Form 1099-K when payments for goods or services top $20,000 in more than 200 transactions, but you must report the income either way. Source: IRS⁶
Keep records. Track the money you receive and your expenses; records help you deduct expenses and fill out your return. Source: IRS³

Watch out Being called a contractor doesn't make you one. If a business controls how and when you do the work like an employee, ask about it. Either the business or the worker can file Form SS-8 to ask the IRS to decide. Source: IRS⁷

Side by side

	W-2 employee	1099 contractor
Taxes taken out of pay	Yes: income tax, Social Security, Medicare	Generally none
Social Security and Medicare	You pay half; employer pays half	You pay all of it: 15.3%
Paying during the year	Through withholding	Estimated payments if you'll owe $1,000+
Who sets how you work	The employer	Generally you control how; they control the result

From the IRS. Source: IRS¹

A quick 1099 set-aside math example

If you earn	15.3% self-employment tax alone
$1,000	$153
$5,000	$765
$10,000	$1,530

Before the half-deduction, and before income tax, which you also owe. Rate from the IRS. Source: IRS² This is why a set-aside of a quarter or more of each payment is common; the IRS withholding estimator and a tax preparer can give you your own number.

See it done

Video by H&R Block Company video

Different Types of 1099 Forms

Watch on YouTube: Different Types of 1099 Forms | H&R Block®

Full title on YouTube: “Different Types of 1099 Forms | H&R Block®”2024 · Checked October 3, 2026

A quick H&R Block video, so it’s a tax company talking. It explains which 1099 forms you might get; our steps cover what you owe on that money.

Video won't load at school or work? No problem. Everything you need is in the steps; the video's just a bonus. Watch it on YouTube later.

If it doesn't work

Think you were wrongly paid as a contractor? Form 8919 is for workers reporting the Social Security and Medicare tax their employer didn't withhold. Source: IRS⁸ Form SS-8 asks the IRS to decide your status. Source: IRS⁷
Missed an estimated payment? Pay as soon as you can. Most people avoid the underpayment penalty if they owe less than $1,000 after withholding and credits, or paid at least 90% of this year's tax or 100% of last year's. Source: IRS⁴
Got a 1099-K for money friends paid you back? Gifts or repayments of personal expenses from friends and family shouldn't be reported on a 1099-K. Source: IRS⁶ Keep the texts or notes that show what each payment was.

Good to know

The details, if you want them. Tap a line to open it.

Both at once

Lots of people have a W-2 job and a 1099 side gig. If you're an employee, Form W-4 has a line for an extra amount you want withheld, which can cover tax on side income instead of separate estimated payments. Source: IRS⁴ See Self-employment taxes.

Take it with you

Printable card Download card (PDF)

Sources

Internal Revenue Service Independent contractor (self-employed) or employee?
Internal Revenue Service Self-employment tax (Social Security and Medicare taxes)
Internal Revenue Service Manage taxes for your gig work
Internal Revenue Service Estimated taxes
Internal Revenue Service Estimated tax FAQs
Internal Revenue Service Understanding your Form 1099-K
Internal Revenue Service About Form SS-8
Internal Revenue Service About Form 8919

Lesson M6.3 · Last checked October 3, 2026 against the sources listed.

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