W-2 vs 1099 Calculator

The common rule of thumb is 25% to 50% on the headline rate, but it depends on how many hours you can actually bill and what you are giving up. A contractor pays both halves of FICA, funds their own health cover and retirement, absorbs unpaid leave and expenses, and carries the risk of gaps between contracts. A role with generous benefits and few billable hours needs a much larger premium than a lean one with steady full-time hours.

A W-2 employee pays 7.65% in FICA and the employer pays the other 7.65%, with income tax withheld each period. A 1099 contractor pays self-employment tax of 15.3% on 92.35% of net profit, covering both halves, though half of it is deductible above the line. Contractors usually have to make quarterly estimated payments because nothing is withheld for them.

Generally yes. Independent contractors do not usually pay into or claim unemployment insurance, are not covered by the client's workers' compensation, and fall outside most employment protections. That is a real cost of the arrangement and worth pricing alongside the tax difference.

Yes, and it is common. The label in the contract does not decide it; the substance of the relationship does, including how much control the company exercises, whether the work is central to its business, and whether you genuinely run an independent business. Misclassification can mean back payroll taxes and overtime owed, and federal and state tests differ.