Solo Hustle Tax Worksheet
Financial Literacy & Applied Economics Independent Contractor Series
Solo Hustle: Self-Employment Taxes
Understanding FICA vs. SECA, employer match burdens, and sole proprietorship compliance.
SECA Tax Rate 15.3%
Name:
Date:
Period:
1
Tax Anatomy: Traditional Employee (W-2) vs. Self-Employed (1099)
| Tax / Benefit Item | W-2 Employed Worker | 1099 Self-Employed Worker |
|---|
| Social Security Tax | 6.2% paid by employee (employer matches 6.2%) | 12.4% (full responsibility) |
| Medicare Tax | 1.45% paid by employee (employer matches 1.45%) | 2.9% (full responsibility) |
| Total Payroll Tax Rate | 7.65% (employee portion only) | 15.3% (SECA Total) |
| Remittance Schedule | Automatically withheld each paycheck cycle | Quarterly Estimated Taxes (Form 1040-ES) |
| Benefits & Leave | Subsidized health, PTO, 401(k) match | 100% self-funded; no guaranteed paid leave |
2
Core Assessment: Legal & Financial Obligations
Q1.
When an individual is self-employed, which of the following is a required financial responsibility that must be managed without employer assistance?
A Applying for paid vacation and sick leave
B Paying both the employer and employee portions of payroll taxes
C Receiving automatic health insurance enrollment
D Reporting income only once every five years
Q2. Explain why the self-employment tax is structured at exactly 15.3%. In your answer, name the two federal trust fund programs it finances and contrast who pays these fees under W-2 employment:
Q3. Scenario Analysis: Jordan transitions from a salaried W-2 graphic designer earning $55,000/year to a full-time freelance contractor earning $55,000 net profit. Why might Jordan face unexpected tax penalties if they wait until April 15th to file and pay their taxes?
Turn over for Part 3: Practical Calculations & Decision Case Study Page 1 of 2
Applied Practice & Financial Modeling
Schedule C & Estimated Tax Lab
Form 1040-ES Modeling
3
Step-by-Step Ledger: Calculating Self-Employment Tax
Case Profile: Elena operates an independent mobile photography business. Over the tax year, she generated $62,000 in gross revenue from client bookings and incurred $14,000 in allowable ordinary business expenses (equipment depreciation, software subscriptions, studio lease, and travel).
| Financial Step & IRS Instruction | Your Work & Final Figures |
|---|
| Step A: Net Business Profit (Schedule C) Gross Income ($62,000) minus Allowable Expenses ($14,000) | |
| $ | |
|
| Step B: Taxable Net Earnings for SECA IRS multiplies net profit by 92.35% (0.9235 factor) |
$
|
| Step C: Self-Employment Tax Total (15.3%) Multiply Step B result by 0.153 (Social Security 12.4% + Medicare 2.9%) |
$
|
| Step D: Quarterly Estimated Tax Payment Divide Step C by 4 quarters (Due: Apr 15, Jun 15, Sep 15, Jan 15) |
$
|
4
Contractor vs. Employee Offer Evaluation
Scenario: Alex receives two competing job offers for a project coordinator role:
Offer A: W-2 Staff Employee
- Base salary: $70,000/year
- Employer pays 7.65% payroll match
- Employer covers 75% of health premium ($6,000 value)
- 15 days paid PTO & 3% 401(k) match
Offer B: 1099 Independent Contractor
- Contract rate: $88,000/year flat
- Alex must pay full 15.3% SECA tax
- Zero employer health subsidy (private policy: $8,000/yr)
- Unpaid time off; no retirement match
Q4. Calculate the additional payroll tax burden Alex incurs under Offer B compared to Offer A, and identify two hidden out-of-pocket costs a contractor must self-fund:
Q5. Synthesis & Recommendation: Despite the higher headline rate ($88,000 vs. $70,000), explain why Offer A might actually offer comparable or superior net financial compensation:
Self-Employment Tax & Financial Literacy Curriculum Standard Page 2 of 2
