Employee vs contractor cost ESTIMATE

Employer cash for a wage payment, including 2026 employer FICA, set next to a contractor invoice.

Important: Educational estimates only. Not tax, legal, or accounting advice. AI Accounting Desk is not a CPA firm and does not provide professional services. Verify figures with a licensed professional and official IRS sources (irs.gov) before making decisions.

General information, not tax or legal advice. Employer Social Security and Medicare rates, and the 2026 wage base, are from IRS Topic 751 and the SSA. Paying someone as a contractor because the employer FICA line is smaller is not a classification. Read 1099-NEC versus W-2 before you use the gap.

Inputs

Social Security for the employer stops at the 2026 wage base of $184,500. Medicare does not.

Result ESTIMATE

Employer cash for the wages
—
Employer FICA in that total—
Contractor invoice—
Wage cost minus invoice—

The gap is employer FICA, and only that

On $2,000 of wages with nothing already paid this year, employer Social Security is 6.2%, or $124, and employer Medicare is 1.45%, or $29. Employer cash is $2,153. A $2,000 contractor invoice has no employer FICA in this model, so it costs $153 less on this one line. Additional Medicare tax is an employee withholding above the threshold; the employer does not match it, so it is not in the employer cash figure. Federal unemployment and state unemployment are omitted. Benefits are omitted. The payroll tax estimator shows the same FICA pieces without the contractor comparison.

A contractor who prices in their own self-employment tax may invoice more than the wage. Type that invoice. The gap can flip. Self-employment tax is the worker’s computation, not a cost you add on top of a 1099 as if you were the employer.

Classification is not this subtraction

The IRS groups evidence into behavioral control, financial control, and the relationship of the parties. Those factors are on the comparison page. This calculator assumes you already know which box the payment belongs in. It will happily show a “savings” for a misclassified employee. That number is not a plan.

Sources

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