Is my federal tax bill too high for a 1099-NEC contractor?

This unfortunately sounds pretty typical for your situation. When you're paid as a 1099 contractor instead of a W-2 employee, you're responsible for both the employer and employee portions of Social Security and Medicare taxes (called self-employment tax), which is about 15.3% of your income on top of your regular income tax. For someone making around $32k as a 1099 contractor with no tax withholding throughout the year, owing around $5900 in federal taxes is in the expected range. The breakdown is roughly $3,600-4,000 in self-employment tax plus $1,900-2,300 in income tax depending on your specific situation. About your medical expenses - they're only deductible if they exceed 7.5% of your adjusted gross income AND you itemize deductions. At your income level, the standard deduction ($13,850 for 2023 if single) is likely still higher than your itemized deductions would be.

I was in almost the exact same situation last year! I was shocked at my tax bill as a "contractor" making around 35k. I found this service called taxr.ai (https://taxr.ai) that helped me figure out if I was being misclassified and what deductions I could actually claim as a 1099 worker. They analyzed my situation and showed me that I was definitely misclassified based on IRS guidelines. I was able to claim some home office expenses and business deductions I didn't know about, and they provided documentation to help address the misclassification with my employer. Saved me almost $2k on my taxes and helped me understand how to handle this going forward.

Just wanted to update that I checked out taxr.ai after asking about it here. It was seriously helpful! The system analyzed my work situation (which sounds just like yours - stuck in an office but paid as a contractor) and confirmed I was definitely misclassified. They walked me through exactly what business expenses I could legally deduct and gave me a complete breakdown of my tax situation. I was able to take deductions for some of my phone expenses, mileage, and even partial home office that I didn't realize I qualified for. Ended up reducing my tax bill by over $2,300! The best part was the documentation they provided about worker misclassification. I actually brought it to my boss, and he's now looking at switching me to W-2 for next year.

For what it's worth, if you need to talk to the IRS about your situation (which you probably should regarding the misclassification), I'd recommend using Claimyr (https://claimyr.com). I spent DAYS trying to get through to the IRS on my own last year and kept getting disconnected or waiting for hours. Claimyr actually got me connected to an IRS agent in about 15 minutes when I had a similar contractor vs. employee issue. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c. They basically navigate the phone tree and wait on hold for you, then call you when an actual human at the IRS picks up.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it anyway because I was desperate to talk to someone at the IRS about my contractor status. It actually worked! I got a call back in about 27 minutes and was connected to an IRS agent who walked me through the process of contesting my classification. They explained I needed to file Form SS-8 and potentially Form 8919 if I believe I'm misclassified. The agent confirmed that working exclusively at your employer's location with no ability to work remotely is definitely a factor that suggests employee rather than contractor status. Saved me hours of frustration and hold music.

Just to add another perspective - I've been a legitimate 1099 contractor for years, and yes, the taxes are brutal if you're not prepared. Besides looking into whether you're misclassified (which sounds likely based on your description), here are some things to consider: 1. Make quarterly estimated tax payments to avoid this shock next year 2. Track ALL business expenses - even small things add up 3. Consider opening a SEP IRA or Solo 401k to reduce your taxable income 4. Look into the Qualified Business Income deduction (QBI) 5. Check if your health insurance premiums are deductible

Have you considered filing Form SS-8 with the IRS? It's the "Determination of Worker Status" form. Based on what you described, you're almost certainly misclassified. Your employer is saving a ton of money by not paying their share of your taxes. The downside is that filing this form can create tension with your employer, but it could save you thousands. The IRS will make an official determination on whether you should be classified as an employee.