Timeline for Why is Social Security & Medicare tax higher as W2?
Current License: CC BY-SA 4.0
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| Dec 21, 2018 at 21:11 | comment | added | dave_thompson_085 | @jamesqf: employer half FICA is part of compensation cost but not part of W-2 box 1. If employer pays $3690 directly, credits you for $60000 and withholds and deposits another $3690 on your behalf, their cost is $63690 but you only owe income tax on $60000 (plus other income less deductions and credits). For 1099 if they pay you the same total $63690, the adjustment on Schedule SE results in the the same SS/Medicare tax and the same income tax as for W-2 of $60000. (However, you get a worse deal on health insurance.) | |
| Dec 20, 2018 at 20:00 | comment | added | D Stanley | @Meyers Your SS on income is the same - but you will ALSO pay self-employment tax (which partly goes to SS) to make up for the SS that your employer is NOT paying. | |
| Dec 20, 2018 at 19:58 | history | edited | D Stanley | CC BY-SA 4.0 |
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| Dec 20, 2018 at 19:24 | comment | added | Meyers | As a 1099 my salary is actually $55,410 and not the full $60,000. Thanks for clarifying. | |
| Dec 20, 2018 at 19:23 | comment | added | Meyers | Understood. So basically, as a W2 my SS total is 60,000 * 15.3% and as a 1099 it would be ((60,000*15.3%)/2)*15.3%. | |
| Dec 20, 2018 at 18:13 | comment | added | jamesqf | Re "YOU WILL MAY MORE as a 1099", that's not actually the case. The part that the employer supposedly pays is part of your compensation, it's just that, as with income tax withholding, it's sent to the government before you get your hands on it. And of course, in order to get your true total compensation as a W2 employee, you have to add the employer amount (plus other benefits) to your notional salary. | |
| Dec 20, 2018 at 17:14 | history | answered | D Stanley | CC BY-SA 4.0 |