Things You'll Need:
- Federal tax table
- State tax table
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Step 1
Look at your total income in box 7 under non-employee compensation. This is your total income for the year. If you were paid royalties, this will be recorded in box 2 on the form. Box 3 is for any other income you received, which could include bonuses. If you had any federal or state tax withheld, this will be recorded in box 4 and box 16 respectively, but most independent contractors will not have entries in these two boxes.
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Step 2
Add boxes 7 and 3 together. This will be your total income for the year. If you have more than one 1099-Misc, add all of the totals together before calculating your tax liability. For this example, the total income on the 1099-Misc form is $6,891 and there were no expense deductions. There were no taxes withheld so the recipient is responsible for federal, state and self-employment taxes.
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Step 3
Calculate your expenses if you have any. Subtract your expenses from your total income. For this example, there are no expenses to deduct so the total income is $6,891. Multiply 6,891 by 92.35% (.9235) to calculate what amount is subject to self-employment taxes (6,891 x .9235 = 6,364).
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Step 4
Use the amount subject to self-employment tax to find your self-employment tax liability. If the amount is under $400, you would not owe any self-employment tax. If your total income is over $102,000, you would multiply the amount subject to self-employment tax by 2.9 percent (.029) and then add $12,648 to that amount. If your total is under $102,000, you multiply the amount by 15.3 percent (.153) to find your self-employment tax. For this example, the total subject to this tax is $6,364. The formula is 6,364 x .153 = 974. The $947 is the amount of your self-employment tax liability.
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Step 5
Figure out how much your federal tax liability will be on your total income. Use Publication 15-T (see Resources, below). Keep in mind that your federal tax liability will be reduced by a standard deduction or an itemized deduction, and/or the earned income credit if it applies to you. You tax is also reduced by other payments and credits.
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Step 6
Calculate how much state if any you will owe on the total income. See the resource box for the state directory on state withholdings. Keep in mind the deductions and credits you will have to lower your tax liability.
