The Difference Between A W2 Employee And A 1099 Employee
Most employers have a hard task when deciding to hire employees. There has been argument as to whether workers are employees or independent contractors. Hiring a 1099 employee or a W2 employee each comes with their advantages and disadvantages.
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. W2 employees receive their wages and benefits from those who have employed them. Their employers have total control in the work they assigned to them. 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 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. However, depending on their pay check their taxes can be withheld.
Hiring a 1099 employee has an advantage of not paying 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 con of hiring an independent contractor is that at times your interests may differ. The contracts are also binding which means as an employer you cannot fire them since you will have breached the 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 greatest advantage of hiring W2 employees is that they become loyal to the company since they want to keep their jobs. You have the advantage of counting on them during busy times. 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. Motivating them is necessary for increased productivity. It is your duty as the employer to provide all the necessary tools and 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 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.