The Difference Between A W2 Employee And A 1099 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. 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 have control when it comes to work. 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 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 have the option of working for different companies. This means that their taxes can be withheld from their pay checks.
Hiring a 1099 employee has an advantage of not paying benefits. You spend a less amount hiring them compared to W2 employees. You have flexibility because you hire them only when in need. They have a lot of training.
The cons of hiring a 1099 in may have a clash of interest. You will also not be able to fire them anytime you want because the contract is binding. 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 on the other hand, get regular salary and benefits from an employer. Employers can withhold taxes from W2 employees and allocate the type of work they are supposed to do.
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 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. As an employer it is your duty to pay their wages, sick leave, Medicare taxes, sick leave as well as other benefits as the page suggests.
Majority of employers make the mistake of misclassifying their employees as independent contractors. This could result in harsh penalties. It is important you know the difference. Familiarize yourself with the IRS requirements to know more about taxes.