The Ultimate Guide to
The Difference Between A 1099 Employee And W2 Employee
Majority of employers have found themselves in a dilemma when hiring employees. There has been an ongoing debate for a long time as to whether workers are employees or independent contractors. Hiring a 1099 employee or a W2 employee each comes with their advantages and disadvantages.
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. Such employees are self-employed and get paid depending on the contract. W2 employees receive their wages and benefits from those who have employed them. Their employers determine the kind of work they do. The check stub vary based on the employer.
A 1099 employee relies on contracts which makes them fully independent. A 1099 employee is independent and works on different contracts. They have the option of flexibility because they determine their time to work and use their skills set. They also charge an amount that they see fit. They have the option of working for different companies. However, depending on the job they do their taxes can be withheld from their pay check.
The advantage of hiring a 1099 employees is that they don’t get benefits. In comparison to W2 employees it costs less to hire them. They provide the flexibility because they are hired when necessary. They have a lot of training.
The cons of hiring a 1099 in may have a clash of interest. 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 on the other hand, get regular salary and benefits from an employer. 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. They can work late for you when needed. You can control their job description and working schedules as the website suggests.
The disadvantage of W2 employees is that it is not easy to train and manage them. You need to dedicate time to keep motivating them for more productivity. 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.
Many employers get caught misclassifying employees as being independent workers as opposed to being full-time. This means that you may get harsh penalties. You need to be able to distinguish between the two. To avoid confusion, ensure you know the IRS requirements.