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Contractor Tax & Pay FAQs

What is the difference between a 1099 contractor and a W-2 employee?

A W-2 employee receives a regular paycheck with taxes withheld automatically. A 1099 contractor receives gross pay with no taxes withheld, making them responsible for paying self-employment tax (15.3%) plus income taxes.

How much should I set aside for taxes as a 1099 contractor?

As a rule of thumb, set aside 25% to 35% of your gross income in a separate tax bank account for quarterly estimated payments.