The Difference Between A 1099 Employee And W2 Employee
Majority of employers have found themselves in a dilemma when hiring employees. For a long time, there has been confusion whether workers are independent contractors or employees. 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. 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. The check stub vary based on the employer.
A 1099 employee is fully independent and has contracts for specific jobs. They get to do their job when they want and they rely on their skills. They are the ones who set the amount they wish to charge. They do work for many businesses. 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. It is also cost-effective to pay them compared to W2 employees. The greatest advantage is that you hire them only when necessary. They come highly trained in their specific fields.
The disadvantages of a 1099 employee is that there may be times when you will have a clash of interest. You will also not be able to fire them anytime you want because the contract is binding. 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 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 is that it is not easy to train and manage W2 employees. You will have to keep motivating them for top performance. You also have to provide the workspace and the necessary tools. 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.
Majority of employers make the mistake of misclassifying their employees as independent contractors. 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.