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The Difference Between A 1099 Employee And W2 Employee

There are some hard decisions that employers have to make when it comes to hiring employees. There has been an ongoing debate for a long time as to whether workers are employees or independent contractors. There are advantages and disadvantages as well as business implication that come with hiring a W2 employee and 1099 employee.

It is important when you decide to file for taxes that distinguish whether your employees are 1099 or w-2 in the forms. A 1099 employee uses a 1099 form to file for their taxes. This is because they are self-employed and get payment based on the terms of contract. A W2 employee get regular wages and benefits from their employer. Their employers determine the kind of work they do. Check stubs are not the same.

A 1099 employee is fully independent and has contracts for specific jobs. They use their skills and can work at their own time. They are the ones who set the amount they wish to charge. They do work for many businesses. This means that their taxes can be withheld from their pay checks.
The advantage of hiring a 1099 employees is that they don’t get benefits. It is also cost-effective to pay them compared to W2 employees. You have flexibility because you hire them only when in need. They come highly trained in their specific fields.

The cons of hiring a 1099 in may have a clash of interest. As an employer you don’t have the option of firing them because you have a contract. Since companies don’t provide insurance cover or 1099 employees, in case of any injury they can sue you.
A W2 employee on the other hand, get regular salary and benefits from an employer. As an employer, you can withhold taxes from such an employee and tell them the work they are supposed to do by setting rules and regulation.

The benefit of W2 employees is that they are committed to their work. You can count on them on busy time by having them work late when necessary. You have total control of their schedules.

The con is that training and managing the W2 employees is not an easy task. You need to dedicate time to keep motivating them for more productivity. As an employer, you will be required to offer them the needed tools as well as the workspace. You also need to pay their wages, social security, sick leave, Medicare taxes and other benefits.

Majority of employers make the mistake of misclassifying their employees as independent contractors. This could result in harsh penalties. It is important you know the difference. Check the IRS requirements to learn about the taxes and avoid confusion.

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