Learning The “Secrets” of

July 28, 2020

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The Difference Between A 1099 Employee And W2 Employee

Most employers have a hard task when deciding to hire employees. There has been argument as to whether workers are employees or independent contractors. Whether you decide to hire a 1099 employee or a W2 employee there are advantages disadvantages of both options.

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. W2 employees receive their wages and benefits from those who have employed them. Their employers determine the kind of work they do. Check stubs are not the same.

A 1099 employee relies on contracts which makes them fully independent. A 1099 employee is independent and works on different contracts. They use their skills and can work at their own time. They also charge an amount that they see fit. They can also choose to work for more than one company. However, depending on their pay check their taxes can be withheld.
The advantage of hiring a 1099 employees is that they don’t get benefits. You spend a less amount hiring them compared to W2 employees. They provide the flexibility because they are hired when necessary. They come highly trained in their specific fields.

The con of hiring an independent contractor is that at times your interests may differ. You will also not be able to fire them anytime you want because the contract is binding. In addition, in case they get injured on your premises, they have the right to sue you.
A W2 employee is trained by their employer, get benefits and a regular salary. 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. They can work late for you when needed. You can control their job description and working schedules as the website suggests.

The con is that training and managing the W2 employees is not an easy task. You will have to keep motivating them for top performance. You also have to provide the workspace and the necessary tools. It is your responsibility to pay for their Medicare taxes, sick leave, social security, wages and other benefits.

Most employers misclassify W2 and 199 employees. This could result in harsh penalties. You need to make a decision of whether to hire a W2 employee or a 1099 employee. To avoid confusion, ensure you know the IRS requirements.