Tips for The Average Joe

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 argument 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.

When filing for taxes you need to make a distinction of whether your employees are W2 or 1099. 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 have control when it comes to work. Check stubs are not the same.

A 1099 employee is fully independent and has contracts for specific jobs. They have the option of flexibility because they determine their time to work and use their skills set. They charge a cost that they find suitable. They do work for many businesses. However, depending on the job they do their taxes can be withheld from their pay check.
Hiring a 1099 employee has an advantage of not paying benefits. In comparison to W2 employees it costs less to hire them. They provide the flexibility because they are hired when necessary. 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. Also, because the company does not provide insurance cover for 1099 employees, in case of any injuries they may sue the company.
A W2 employee is trained by their employer, get benefits and a regular salary. As an employer you have the right to withhold taxes and set rules and regulations for work.

The benefit of W2 employees is that they are committed to their work. You have the advantage of counting on them during busy times. You have total control of their schedules.

The disadvantage of W2 employees is that it is not easy to train and manage them. Motivating them is necessary for increased productivity. As an employer, you will be required to offer them the needed tools as well as the workspace. 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 means that you may get harsh penalties. You need to be able to distinguish between the two. Check the IRS requirements to learn about the taxes and avoid confusion.