What Does It Mean to Be Self-Employed?
You are considered self-employed if you received:
1099-NEC or 1099-K income
Cash or Venmo/Zelle payments for services
Income from gig work, freelancing, or a small business
Common examples in Nebraska include:
DoorDash, Uber, Instacart, Amazon Flex
Construction trades & contractors
Farmers and ranchers
Consultants, designers, coaches
Online sellers and content creators
If no taxes were withheld from your income (which is common for self-employed individuals) you owe them yourself.
The IRS has an article on how to determine if you are a 1099 or W-2 employee.
Why 1099 Taxes are Higher Than W-2 Taxes
Most people are shocked the first time they see their tax bill.
That's because self-employed individuals pay:
Social Security tax at 12.4% (usually 6.2% for W-2 employees)
Medicare tax at 2.9% (usually 1.45% for W-2 employees)
Federal income tax at 10% up to 37% depending on income.
Nebraska income tax at 2.5% up to 6.6% depending on income.
The 12.4% and 2.9% (total of 15.3%) of self-employment tax applies on top of regular income tax. For normal W-2 employees, the employer pays half of these taxes (6.2% and 1.45% for a total of 7.65%). Due to being self-employed, you are the employee and employer.
Without proper deductions, a $50,000 self-employed income can easily create a $10,000 tax bill.
The Good News: You Get Powerful Deductions
Ordinary and Necessary Business Expenses
The IRS allows self-employed taxpayers to deduct ordinary and necessary business expenses, which may include:
Why Many 1099 Workers Overpay Thousands
Many 1099 workers overpay thousands because they:
Tip: even a basic excel spreadsheet can be used to track expenses accurately
