I am living in Hong Kong but paying taxes as a US citizen to the US. The company I work for is in MA. Although I receive a 1099-NEC, in actual practice I am a part-time employee. I understand that I need to pay self-employment taxes (15%) to federal government, however it seems strange that I also need to pay self-employment taxes to MA state (15%). Doesn't the 15% I pay to federal government already cover my social security? On top of that it seems I need to pay income taxes to both the federal government (10%+) and MA government (5%+).
According to the Mass.gov website:
You need to file a Schedule C if:
You received a Form 1099-NEC for nonemployee compensation
Nonresidents - Report income from Massachusetts sources.
In that case it seems I have to face a crushing tax burden of roughly 40% (15% + 15% + 5% + 5%), even after factoring in the standard deduction on federal income tax.
Please inform me if my understanding is correct or I am missing something?