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. There has been an ongoing debate for a long time as to whether workers are employees or independent contractors. 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. 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. 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 are the ones who set the amount they wish to charge. They have the option of working for different companies. This means that their taxes can be withheld from their pay checks.
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 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. 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 greatest advantage of hiring W2 employees is that they become loyal to the company since they want to keep their jobs. 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 will have to keep motivating them for top performance. 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.
Majority of employers make the mistake of misclassifying their employees as independent contractors. This can cause harsh penalties. It is important you know the difference. Familiarize yourself with the IRS requirements to know more about taxes.