Employment Tax and Contractor Taxes

employment tax

It’s important to draw a distinction between “Income Tax” and “Employment Tax”. Employees and Contractors are subject to the same income tax rates. However, employees pay half of their overall employment tax liability (7.65%), while their employer pays the other half, for a total of 15.3%. Self-employed individuals, or contractors, are both the “employee” and the “employer,” accordingly, they are liable for the entire 15.3% of employment taxes. For this reason, contractors generally have a higher overall tax burden than employees.

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