Everything You Need To Know About A W2 Employee And A 1099 Employee
Majority of employers have found themselves in a dilemma when hiring employees. For a long time, there has been confusion whether workers are independent contractors or employees. Hiring a 1099 employee or a W2 employee each comes with their advantages and disadvantages.
It is important when you decide to file for taxes that distinguish whether your employees are 1099 or w-2 in the forms. A 1099 employee uses a 1099 form to file for their taxes. 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 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 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 do work for many businesses. However, depending on the job they do their taxes can be withheld from their pay check.
The advantage of hiring a 1099 employees is that they don’t get benefits. It is also cost-effective to pay them compared to W2 employees. You have flexibility because you hire them only when in need. They come highly trained in their specific fields.
The con of hiring an independent contractor is that at times your interests may differ. 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 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 have the advantage of counting on them during busy times. 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 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. It is your responsibility to pay for their Medicare taxes, sick leave, social security, wages 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. Familiarize yourself with the IRS requirements to know more about taxes.