The Tax Bite

Teacher Facilitation Guide

Lesson 4 of 5

Duration: 60 Minutes

Lesson Goal

Students will understand the administrative and financial reality of being an independent contractor (1099). They will learn how to estimate self-employment taxes and use deductible business expenses to lower their taxable income.

Key Vocabulary

• 1099 vs. W-2
• Self-Employment Tax (15.3%)
• Deductible Expenses
• Taxable Income
• Quarterly Estimated Taxes
• Schedule C

Materials Needed

The Tax Bite Worksheet
Mock Currency / Play Money
Envelopes (labeled: Federal, State, Social Security)

Instructional Flow

Hook

10 MINS

The Paycheck Shock

Hand each student $100 in play money (their "Gross Income" from a gig). Then, walk around the room with three labeled envelopes.
1. FICA/Social Security: "Hand back $15.30. Since you're the boss, you pay both parts."
2. Income Tax Estimate: "Hand back $15.00 for the IRS."
3. State Tax Estimate: "Hand back $5.00 for the state."

Debrief: Students are left with ~$65. Ask: "How does this change your side hustle's EHR from Lesson 3?"

Intro

15 MINS

Independent Contractors vs. Employees

Explain that 1099 workers don't have taxes withheld automatically. They are responsible for paying the "employer" portion of Social Security/Medicare (the Self-Employment Tax).

The Silver Lining: Business expenses are deducted before taxes are calculated.

Activity

35 MINS

Filling out the Mock Schedule C

Students use The Tax Bite Worksheet to calculate their net profit after expenses, and then apply a standard 25-30% "Tax Reserve" rule of thumb to see their actual take-home pay.

Crucial Concept: Deductions

What counts as a "Business Expense"?

The IRS rule: Must be "Ordinary and Necessary" for your business.

✅ YES (Deductible)

Professional software for the hustle
Supplies specifically for customers
Advertising / Business Cards
Work-related travel (mileage)

❌ NO (Not Deductible)

Lunch on a normal workday
Commute from home to office
Clothes you wear outside work
Personal phone plan (unless 100% biz)

Questioning Strategy

"If you spend $500 on a laptop for your business, does that mean your tax bill is $500 lower?"

Goal: Clarify that a deduction lowers taxable income, not the tax bill directly (Tax Credit vs. Deduction).

"Why do 1099 workers need a separate savings account?"

Goal: Emphasize the need to save for quarterly payments so they aren't surprised by a massive bill in April.

Misconception Alert

Students often think that if they don't get a 1099 form (usually for earnings under $600), they don't owe taxes. Correction: All income is taxable regardless of whether a form is issued. It is the taxpayer's responsibility to report it.

The Tax Bite

Tax Bite Teacher Guide

Tax Bite Worksheet

Tax Bite Slides