The Difference Between A 1099 Employee And W2 Employee
Most employers have a hard task when deciding to hire 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.
When filing for taxes you need to make a distinction of whether your employees are W2 or 1099. You will use a 1099 form to file for taxes if you are a 1099 employee. Such employees are self-employed and get paid depending on the contract. As for W2 employees, they get benefits and wages from their employer. Their employers have control when it comes to work. The check stub differ depending 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 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. 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. It is also cost-effective to pay them compared to W2 employees. You have flexibility because you hire them only when in need. They are also trained in their field.
The disadvantages of a 1099 employee is that there may be times when you will have a clash of interest. The contracts are also binding which means as an employer you cannot fire them since you will have breached the 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 one who an employer takes time to train, offer the necessary tools for working, provides benefits and pays them 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 advantages of having W2 employees if that they are loyal to the company because they want to have their jobs for a long time. 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. As an employer, you will be required to offer them the needed tools as well as the workspace. As an employer it is your duty to pay their wages, sick leave, Medicare taxes, sick leave as well as other benefits as the page suggests.
Most employers misclassify W2 and 199 employees. This can cause harsh penalties. You need to be able to distinguish between the two. Check the IRS requirements to learn about the taxes and avoid confusion.