🧾 Freelance & self-employment tax

Self-employment tax is the part that surprises people. As an employee you pay 7.65% toward Social Security and Medicare and your employer quietly pays the other half. Work for yourself and you pay both halves — 15.3% on 92.35% of your profit, up to the $184,500 Social Security wage base for 2026, with Medicare continuing above it. That is before a cent of income tax.

It also arrives on a different schedule. Nobody withholds anything for you, so the IRS expects payment four times a year, and expects it to be roughly right — miss the mark and there is an underpayment penalty charged at the federal short-term rate plus three points.

Where to start

If you are new to this, work in this order. Find out what the tax on your profit actually is, then work out what to send each quarter, then check the safe harbour figure — the minimum that makes you penalty-proof regardless of how the year turns out. That last one matters most if your income is unpredictable, because it lets you stop guessing.

If you are deciding what to charge rather than what to pay, the rate calculator works backwards from the income you want to the rate that delivers it after tax, unpaid time and expenses. And if you are weighing a contract against a job offer, the 1099 versus W-2 comparison converts one into the other honestly — benefits, employer payroll tax and unpaid leave included.

Two things catch people out every year. The 1099-K threshold governs whether PayPal, Stripe or Etsy report your takings to the IRS — but receiving a form has never been what makes income taxable, and not receiving one has never made it invisible. And the deadlines are not evenly spaced: the second quarter payment is due in June, not July, which is the single most missed date in the calendar.