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. For a long time, there has been confusion whether workers are independent contractors or employees. Whether you decide to hire a 1099 employee or a W2 employee there are advantages disadvantages of both options.
When filling out tax forms, you need indicate if your employees are W2 or 1099. A 1099 employee uses a 1099 form to file for their taxes. Such employees are self-employed and get paid depending on the contract. A W2 employee get regular wages and benefits from their employer. Their employers have control when it comes to work. 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 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 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. As an employer you don’t have the option of firing them because you have a contract. 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 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. 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. 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.
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. Familiarize yourself with the IRS requirements to know more about taxes.