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Self-Employment FAQs

What is a 1099 tax form used for?

A 1099 form is used to distinguish payments made to a�?Independent Contractors,a�? or those who are not treated as employees, from payments made to salaried or hourly a�?Employeesa�? (who are generally issued W-2 forms.)

What distinguishes an employee from an independent contractor?

Very basically, whether a worker is considered an employee or an independent contractor is defined by how much control a business owner has over the individuala��s services.

Please see the free IRS Publication 1779 a�� Independent Contractor or Employee?

Note: The IRS does not offer a 1099 form to print off. Click here to view a sample form and for information on how to order issuable 1099s.

Who is eligible for a 1099 form?

Please see the free IRS Publication 1779 a�� Independent Contractor or Employee?

How is SE tax calculated?

A self-employed person must pay both the employer and employee share of tax that goes to Social Security and Medicare. The self-employment tax rate is currently 15.30% of your net income.

Remember that half of that tax you owe is allowed as a deduction against your income. Therefore, about 92.35% of your income (if under $102,000) gets taxed at the 15.30% ratea��the actual rate over your whole income is therefore about 14.13%.

See this link for a Self-Employment Tax Calculator.

How are estimated taxes figured?

If you owed the government last year, the easiest way to figure your estimated taxes is to take the amount from your prior year, Form 1040, Line 63 (Total Tax) and divide by four. This will be the amount that you will need to pay every quarter (Form 1040-ES due April 15th, June 15th, September 15th, and January 15th.) Contact your tax return preparer for additional guidance, since this basic a�?safe-harbora�? formula does not apply in several circumstances.

lipitor For Businesses: If you need a 1099 form to print off, more details on what distinguishes an employee vs. independent contractors, independent contractor contract forms or other information about issuing 1099s, check out the important forms below.

For the Self-Employed: If you need information about whata��s deductible, different ways to deduct vehicle expenses, employee vs. independent contractor advice, or a self-employment tax calculator, see the important links above. Or, please visit www.irs.gov, go to your local IRS branch office (3rd floor of Federal Building at Olive and Howes in Fort Collins) or business office supply store for permitted filing forms.