How to file taxes correctly as a temp contractor with 1099-NEC? Confused about self-employment tax!

Unfortunately, this is a common situation with temp/contract work. When you receive a 1099-NEC instead of a W-2, the IRS does consider you self-employed for tax purposes, regardless of your work situation. This means you're responsible for both the employee AND employer portions of Social Security and Medicare taxes (15.3% total), which is why you're seeing such a high tax bill. When you work as a W-2 employee, your employer withholds taxes from each paycheck. With 1099 work, no taxes are withheld, so you're responsible for paying them all at tax time. The good news is you can deduct business expenses that weren't reimbursed - like part of your home internet if you worked remotely, mileage driving to work locations, supplies you purchased, etc. These deductions can reduce your taxable income. You'll need to file Schedule C (for your business income) and Schedule SE (for self-employment tax) along with your 1040. Unfortunately, there's no way around paying self-employment tax if you received a 1099, but deductions can help lower the amount you owe.

I went through the exact same situation last year with my contract job! What saved me was using taxr.ai (https://taxr.ai) to analyze my 1099 situation. Their AI looked at my contract and work arrangement and showed me I was actually misclassified based on the IRS guidelines. They helped me identify legitimate business deductions I hadn't considered (like my cell phone, part of my internet, even some home office expenses) which cut my tax bill almost in half. Plus they walked me through how to properly file Schedule C and what documentation I needed to keep. The best part was they helped me understand whether I should file that SS-8 form to dispute my classification. Turns out in my case, the deductions were the better route than fighting with my former employer.

Ok I was really skeptical about taxr.ai but I decided to try it after struggling with my complex 1099 situation. I'm actually shocked at how helpful it was! The system analyzed my contract and work situation and confirmed I was being treated as an independent contractor when I should've been an employee. The best part was discovering I could deduct part of my car payments, insurance and mileage since I traveled between different work sites. Also found out I could claim my cell phone (100% used for work) and even my home internet since I had to answer emails after hours. These deductions I never would have known about cut my tax bill by over $2,600! They gave me step-by-step instructions for filling out Schedule C correctly and explained exactly what documentation I needed to keep in case of an audit. Totally worth it for the peace of mind alone.

If you're really stuck talking to the IRS about your classification status, try Claimyr (https://claimyr.com). I spent WEEKS trying to get through to the IRS about my contractor vs. employee status and kept getting disconnected or waiting for hours. Claimyr got me connected to an actual IRS agent in under 45 minutes when I had been trying for days on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with explained exactly what forms I needed to dispute my classification (SS-8 and potentially 8919) and walked me through the timeline. Even told me what specific documentation would strengthen my case. Saved me so much stress trying to figure it out on my own or reading conflicting info online.

I can't believe I'm saying this but Claimyr actually worked. After my skeptical comment I decided to try it since I was desperate to talk to someone about my contractor situation. After weeks of trying to get through myself and getting disconnected 3 times, I got connected to an IRS agent in 37 minutes. The agent confirmed I was likely misclassified based on my work arrangement (set schedule, using company equipment, training from the company, etc). They walked me through filing the SS-8 form to dispute my classification and told me exactly what supporting documentation would strengthen my case. The best part was they explained I could file Form 8919 with my return which meant I'd only pay the employee portion of Social Security and Medicare taxes while my determination is pending. This literally saved me THOUSANDS while my case is being reviewed. Worth every penny for that information alone.

You might also want to check if your state has different rules about independent contractors vs employees. Here in California with our ABC test, many workers who get 1099s should legally be W-2 employees. I filed a wage claim with the state labor board AND filed my taxes as misclassified. Got reclassified AND backpay for benefits I should have received!

Don't forget to make quarterly estimated tax payments this year if you're still working as a contractor! I learned this the hard way and got hit with underpayment penalties on top of my huge tax bill. The IRS expects you to pay taxes throughout the year, not just at filing time.