: Employee v. 1099 small expenses in the USA In the USA, Sally is a normal employee making 0,000 a year At the end of the year, she files her taxes with taxact.com and pays the fee. Sally simply claims the standard

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This micro example points to a much larger discrepancy. With the new tax law much fewer Sallys will be able to itemize leaving potential tax deductions as wasted. Her tax returns are simplified but she might have paid less taxes under old tax policies. To be fair to the current administration, things have been moving in this direction for many years now. People used to be able to deduct credit card interest and charitable giving could be deducted without itemizing. However, things are trying to be made more simple.

The Janes of the world can also probably deduct mileage, a home office expense, internet access at home, portions of things like home repair, phone bill, vacations, meals, the list goes on. The Sallys of the world have these same expenses however, were never able to deduct many of these expenses.

The Janes do have some downsides: they pay both sides of social security, they don't get vacation, they have increased tax and other regulatory complexity. A big one is they don't qualify for group insurance policies. Health insurance is the big one, but also disability and life play a role.

For some people being a 1099 can be very lucrative, others it is pure hell and leads to financial disaster. Often times the best situation is when a married couple has one on a w-2 job with good benefits and the other on a 1099. The 1099 person needs to be relatively healthy so they can qualify for life and disability insurance policies at a reasonable price.

Keep in mind well paying 1099 positions are not very common since the Microsoft lawsuit.