We've gotten some questions lately from clients that are being offered new jobs. They have a choice of being set up as an employee or independent contractor (self employed). Let us cover the differences in taxation.
Taxes on self employed is always higher. It's because of FICA tax.
An employee typically has fica tax withheld which equals 7.65% of their paycheck. The employer matches that amount so 15.3% is the amount remitted to IRS. So the employee winds up paying 7.65%
A self employed individual pays the same 7.65% to IRS but ALSO pays the employer matching portion of 7.65%. So self employed wind up paying 15.3% to IRS.
If you are being given a choice about being an employee or self employed, consider the additional SE tax and if you go that route, you may want to negotiate for a higher pay rate, to cover your additional tax.
Hope this helps. If you have questions, please let us know.