As someone who's been through this transition multiple times (employee → contractor → back to employee → contractor again), I can definitively say that yes, contractors typically pay more in total taxes, but the gap isn't as dramatic as it first appears. The real eye-opener for me was understanding that the "extra" 7.65% in self-employment tax isn't actually extra money out of pocket - as a W-2 employee, your employer was paying that portion, which effectively reduced what they could offer you in salary. Many contractors can negotiate rates that more than compensate for this difference. Here's what I wish someone had told me upfront: **The Bad News:** You'll pay about $4,000-5,000 more in self-employment taxes on $65k income compared to a W-2 employee. **The Good News:** With diligent expense tracking, most contractors can find $6,000-12,000 in legitimate business deductions. I track everything from my home office (biggest deduction), professional development, equipment, business meals, and even the business portion of my cell phone bill. **The Game Changer:** Solo 401(k) contributions. I went from maxing out at $23,000 in employee contributions to being able to put away $45,000+ annually. That extra $22,000 in tax-deferred savings more than makes up for the higher FICA burden. My advice: take the contractor role if the work itself appeals to you, but treat the tax situation seriously from day one. Open a separate business account, track every expense, and set aside 30% of each payment for taxes. The math usually works out favorably, but only if you stay organized.

This thread has been incredibly enlightening! As someone who's been hesitant to make the leap to independent contracting, reading everyone's real experiences and actual numbers has really helped clarify things. What strikes me most is that while contractors do face that initial 15.3% self-employment tax hit, the combination of business deductions, retirement savings advantages, and potential for higher rates can actually make it financially beneficial. The key seems to be treating it seriously as a business from day one. A few things I'm taking away: - Set aside 25-30% of each payment for taxes immediately - Track EVERY business expense from the start (home office, equipment, mileage, etc.) - Take advantage of Solo 401(k) higher contribution limits - Consider the QBI deduction and health insurance deductions The cash flow management aspect is definitely something I hadn't fully considered - having to handle quarterly payments instead of automatic withholding is a big mindset shift. For anyone else reading this thread, it seems like the bottom line is: yes, you'll pay more in self-employment taxes, but with proper planning and deduction tracking, your overall financial situation can actually improve. Plus you get much more control over your retirement savings strategy. Thanks to everyone who shared their real numbers and experiences - this has been more helpful than any article I've found online!

Has anyone dealt with a situation where the ex-spouse refuses to share information about improvements they made to the property? My ex won't tell me what she did to the house after I moved out, but I know she finished the basement.

One thing to keep in mind is that since you haven't lived in the house for over 5 years, you'll be subject to capital gains tax on your portion of the profit. However, make sure you're calculating your basis correctly - it should include not just half of the original purchase price ($121,000), but also any qualifying improvements made while you owned the property. The fact that your ex was responsible for ongoing costs per the divorce decree doesn't change your tax basis, but any capital improvements made during your joint ownership period could increase your basis and reduce your taxable gain. Given the numbers you provided, you're looking at roughly a $31,000 capital gain ($152,000 - $121,000), which will be taxed as a long-term capital gain since you owned the property for more than a year. When entering this in TurboTax, make sure to indicate that you received a 1099-S and report your 50% ownership share. The software should walk you through the process, but double-check that you're only reporting your portion of both the proceeds and the basis.

Whatever you do, don't ignore this! I made that mistake once thinking "they don't have my SSN so it won't matter" and ended up with a CP2000 notice from the IRS and penalties. Even if the 1099 has incorrect info, the IRS will eventually connect the dots.

I went through something very similar last year. The company somehow got my SSN wrong on the 1099 (they had one digit off), but I still had to report the income. Here's what I learned: even if the SSN is incorrect, you absolutely need to report that income on your tax return. The IRS has sophisticated matching systems that can connect 1099s to taxpayers using name, address, and other identifying information. What I did was report the income on Schedule C as required, but I also included a brief statement with my return explaining the SSN discrepancy on the 1099 form. I contacted the company to request a corrected 1099-MISC with the proper SSN, which they eventually sent, but I didn't wait for it to file my taxes. The bottom line is that cash payments don't make income "under the table" - all income is taxable regardless of how you're paid. The 1099 just creates a paper trail that makes it much more likely the IRS will notice if you don't report it. Better to be proactive and report it correctly than deal with penalties and interest later.

Has anyone tried using the IRS Tax Withholding Estimator? It helped me figure out my withholding issues last year.

This is a really common issue for tipped employees, and you're smart to be thinking ahead about potential tax liability. The inconsistent withholding happens because your paycheck amount varies so much with tips - when tips are high, there's often not enough in your actual hourly wages to cover all the required withholdings. One thing that might help is talking to your payroll person about adjusting your W-4 to have an additional flat amount withheld each pay period, regardless of your tip income. You could also consider opening a separate savings account specifically for taxes and automatically transferring a percentage of your weekly earnings there. Keep detailed records of all your tip income too - you'll need accurate numbers for tax filing, and it'll help you calculate how much you should be setting aside. Generally, putting away 20-25% of your total income (wages + tips) for taxes is a safe bet for most servers.

I'm dealing with this exact same issue right now and honestly, this thread has been a lifesaver! I set up my single-member LLC mid-year and have been so confused about how to handle the tax filing with mixed 1099s. What really clicked for me after reading everyone's responses is understanding that even though I have an LLC and EIN, the IRS still sees my business income as personal income because it's a "disregarded entity." So whether my 1099s show my SSN or EIN doesn't actually change my tax liability at all. I was getting ready to pay an accountant hundreds of dollars just to confirm what I should enter in TurboTax, but now I feel confident moving forward with entering everything in the business section like everyone suggested. Going to definitely send my clients updated W-9s with my EIN for next year though - the privacy and business credit benefits make total sense. Thanks to everyone who shared their experiences! It's so reassuring to know this is a common situation and not something to stress about.

I just wanted to add my perspective as someone who's been through this multiple times with different LLCs. The confusion you're experiencing is totally normal - the relationship between LLC structure and tax filing can be really counterintuitive at first. One thing that might help is thinking of it this way: your LLC is like a legal "wrapper" around your business activities, but for tax purposes, the IRS basically looks right through that wrapper and sees your business income as personal income. That's why they call it a "disregarded entity." So when TurboTax asks for your business information and you enter your LLC name and EIN, you're just providing organizational details. The actual income reporting works the same whether your 1099s have your SSN or EIN - it all flows to the same place on your tax return. I'd also suggest keeping a simple spreadsheet of your 1099s showing which ones came with which identifier. It's not required, but it's helpful for your own records and gives you peace of mind if any questions come up later. You're definitely on the right track though!