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I was comparing how much I'd pay in Social Security as a 1099 and as a W2.

As a W2 employee, my Social Security and Medicare total is $9,180 while my total as a 1099 is $8,478.

Why the difference in totals? I understand that my employer would pay half as a W2, but I assume that's not the reason the total is higher.

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    Is the total taxable income the same?
    – D Stanley
    Commented Dec 20, 2018 at 15:26
  • Well, I used this online tool. It will return two totals based on the same amount: moneychimp.com/features/fica.htm
    – Meyers
    Commented Dec 20, 2018 at 16:18

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The explanation is on the page you linked (emphasis added):

If you're an employee, then you pay one half of this total (probably as a withholding on your paycheck); your employer pays the other half for you (and then gets a deduction for their half on their corporate tax return, since it's an expense - for them it's as if the FICA "half" is an additional piece of salary). If you're self-employed, then you pay the whole total yourself as Self-Employment tax, and then get a tax deduction on half of it as an "adjustment" on your tax return.

But, note that YOU WILL PAY MORE as a 1099 "contractor" since you will be paying the WHOLE amount, not just half. The calculator is just baking in the deduction for the extra half that you pay.

So as an employee, you will pay $4,590 (not the total $9,180 - the employer pays the other half). As a 1099 you will pay $8,478; less than double because the other half is deductible, which reduces your taxable income.

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  • 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.
    – jamesqf
    Commented Dec 20, 2018 at 18:13
  • 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%.
    – Meyers
    Commented Dec 20, 2018 at 19:23
  • As a 1099 my salary is actually $55,410 and not the full $60,000. Thanks for clarifying.
    – Meyers
    Commented Dec 20, 2018 at 19:24
  • @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.
    – D Stanley
    Commented Dec 20, 2018 at 20:00
  • @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.)
    – dave_thompson_085
    Commented Dec 21, 2018 at 21:11

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