Net to bottom line
A $100,000 1099 contract is not equivalent to a $100,000 W-2 salary. The contractor pays the employer half of FICA (~7.65%), buys their own health insurance (potentially $10,000+/year for a family), funds their own retirement, has no PTO, no employer-paid life or disability insurance, and bears the cost of accounting and tax compliance.
Rule of thumb
A common multiplier is 1.3x to 1.4x — meaning a $100,000 W-2 offer translates to roughly $130,000 to $140,000 1099 to be financially equivalent. The exact multiplier depends on benefits foregone and tax bracket.
QBI deduction offset
Below the QBI threshold, the 20% qualified business income deduction can offset some of the additional cost. A $130,000 1099 might have an effective tax rate slightly lower than a $100,000 W-2 because the QBI deduction reduces taxable income by 20% of the net Schedule C profit.
Risks
Contractor income is variable and not protected by employment law (no unemployment, no overtime, no minimum wage protection at the state level in most states). Contractors carry the risk of slow-paying clients, project cancellation, and lost business. Build a cash reserve at least 3-6 months of expenses.
When 1099 wins
Multiple clients (true freelance work). Highly specialized skills with strong demand. Ability to control work hours and location. Comfort with self-discipline and self-marketing. Health insurance coverage available through a spouse, ACA marketplace, or association plan. Strong existing business infrastructure (LLC, accountant, business bank account).
When to bring in a professional
DIY tax software handles most small-business returns competently, but a handful of situations reliably justify a CPA or enrolled agent: an entity formation or election, a multi-state filing situation, a significant fixed-asset purchase that triggers Section 179 or bonus depreciation modeling, a retirement-plan setup, an IRS notice or examination, and the year of an entity sale. Outside those situations, software plus an annual half-day of personal review produces a defensible return. The cheapest professional engagement is a one-hour consultation rather than a full-service tax-prep relationship.
Where the IRS publishes guidance on this topic
The IRS publishes a layered set of free resources on most small-business tax topics: a relevant publication (usually one of Pub 334, 463, 535, 587, 946, 560, or 583), the instructions to the relevant form, the "Small Business and Self-Employed Tax Center" landing pages on IRS.gov, and the Audit Techniques Guides written for IRS examiners. Reading the agency's own materials is the cheapest tax education available. They are written in plain English, updated annually, and they reflect exactly the framework an examiner will apply if your return is selected.