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. 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. You will use a 1099 form to file for taxes if you are a 1099 employee. Such employees get paid based on the terms of the contract and are self-employed. A W2 employee get regular wages and benefits from their employer. Their employers have total control in the work they assigned to them. 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 also charge an amount that they see fit. They have the option of working for different companies. This means that their taxes can be withheld from their pay checks.
The main benefit of hiring a 1099 employee is that you don’t have to pay them benefits. In comparison to W2 employees it costs less to hire them. The greatest advantage is that you hire them only when necessary. They have a lot of training.
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. In addition, in case they get injured on your premises, they have the right to sue you.
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 can count on them on busy time by having them work late when necessary. You have total control of their schedules.
The disadvantage of W2 employees is that it is not easy to train and manage them. 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. You also need to pay their wages, social security, sick leave, Medicare taxes and other benefits.
Many employers get caught misclassifying employees as being independent workers as opposed to being full-time. This could result in harsh penalties. You need to make a decision of whether to hire a W2 employee or a 1099 employee. To avoid confusion, ensure you know the IRS requirements.
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