What is the total self-employment tax percentage independent contractors must pay, unlike traditional employees who split the cost?
Answer
15.3%
Independent contractors face the full burden of Social Security and Medicare taxes, collectively known as FICA taxes, which total 15.3%. This contrasts sharply with traditional employees, whose employers contribute an equal matching portion, meaning the employee only pays half of that total rate. This 15.3% paid entirely by the contractor represents a significant hidden cost of doing business in the gig economy, requiring the worker to earn substantially more than a salaried counterpart to achieve the same net take-home pay after taxes.
Related Questions
Where did the term "gig" used in the gig economy originate?What is the typical legal classification for workers in the gig economy instead of traditional employees?What is the total self-employment tax percentage independent contractors must pay, unlike traditional employees who split the cost?Which IRS form is often used to report total nonemployee compensation paid to a gig worker?What is cited as the primary attraction for individuals choosing gig work over traditional employment?What key factor determines if a relationship leans toward employment rather than classifying the worker as an independent contractor?Which category of gig work includes services like writing, editing, and specialized consulting advice delivered digitally?What specific financial disadvantage relates to gig workers not receiving compensation for periods of rest such as vacations or sick days?How do companies relying on gig workers frequently use technology to manage service provision?What legal requirements associated with employing staff do companies avoid by classifying workers as independent contractors?