conversation: User (job_throwaway1): "I'm considering leaving my full time position to become a contract employee for another company. The pay is 25-50% more at the contract position, dental &amp; health fully paid for (I pay $140/month for dental, vision, health now) and gives me a chance to expand my skill set. Contracts typically last 2-3 years. Other than the risk of being unemployed after a contract, is there any reason not to take the contract position? I'm not sure how taxes work for a contract position and would like to bring it up in negotiation for pay rate (I read contact employees pay more in taxes). Thank you for your help  "
  Self: "If you're getting a 1099 then your employer is not paying any portion of payroll taxes.  Usually you each pay half of the 13%.  As a contractor you will be subject to the self employment tax and have to pay the entire 13% out of pocket.\n\nAlso, be aware that you will likely have to pay estimated taxes each quarter.  If you don't you will get penalized.  \n\nIf you talk to HR people, they will tell you that a contractor usually saves them 30-35% over a similarly paid employee.  However, if they are paying your benefits I'm not sure how true that will be."
  User (job_throwaway1): "I briefly read about the payroll taxes so I will be sure to bring that up in negotiation now that I have solid numbers. 30-35% of my pay for the quarter is what I'd pay in taxes each quarter or that's just to be safe? I'd hate to owe big money during tax time next year so I appreciate your advice. Would filing taxes be different for having a full time position and contractor position? Sorry to bombard you with questions."
  Self: "No, the 30-35% is how much an employer saves by paying someone as an independent contractor on average, versus paying them as an employee.  This has to do with benefits, overhead, and tax savings to the company.  SInce they are paying you benefits, this doesn't really hold as a precise figure.  \n\nFiling taxes at the end of the year is the same, you just enter earnings as self employment income instead of wages on your 1040.  Pretty easy.  The quarterly taxes are harder to estimate your first year, since you are supposed to pay estimated taxes each quarter in the amount of 1/4 of your prior years earnings.  You'll have to extrapolate out your total year's earnings if you don't know it, calculate taxes, and pay 1/4 each quarter.  This is basically instead of witholdings.  "
  User (job_throwaway1): "Thank you. The process makes sense. \nSo I would use my annual salary they offer and [apply this chart](http://blogs-images.forbes.com/kellyphillipserb/files/2013/02/single.png). I would take 13.3% of annual for medicare and social security tax. Then sum those two and divide by four? Thanks again"
  Self: "In a simplified way, yes.  Don't forget, taxable income is not the same as gross income.  Taxable income comes after allowed deductions.  "
  