The Difference Between A 1099 Employee And W2 Employee
Majority of employers have found themselves in a dilemma when hiring employees. There has been argument as to whether workers are employees or independent contractors. 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. A 1099 employee is required to fill a 1099 form. This is because they are self-employed and get payment based on the terms of contract. As for W2 employees, they get benefits and wages from their employer. Their employers determine the kind of work they do. Check stubs are not the same.
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 can also choose to work for more than one company. 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. In comparison to W2 employees it costs less to hire them. You have flexibility because you hire them only when in need. 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. 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 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 have the right to withhold taxes and set rules and regulations for work.
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 can count on them on busy time by having them work late when necessary. Employers have total control over their job descriptions and 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. As an employer, you will be required to offer them the needed tools as well as the workspace. 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 could result in harsh penalties. It is important you know the difference. Check the IRS requirements to learn about the taxes and avoid confusion.