Everything You Need To Know About A W2 Employee And A 1099 Employee
Most employers have a hard task when deciding to hire employees. For a long time, there has been confusion whether workers are independent contractors or employees. 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. A 1099 employee is required to fill a 1099 form. Such employees are self-employed and get paid depending on the 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 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 get to do their job when they want and they rely on their skills. They are the ones who set the amount they wish to charge. They can also choose to work for more than one company. 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. You spend a less amount hiring them compared to W2 employees. You have flexibility because you hire them only when in need. They are also trained in their field.
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. 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 trained by their employer, get benefits and a 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. You have total control of their schedules.
The disadvantage is that it is not easy to train and manage W2 employees. You will have to keep motivating them for top performance. 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.
Most employers misclassify W2 and 199 employees. This could result in harsh penalties. You need to make a decision of whether to hire a W2 employee or a 1099 employee. Check the IRS requirements to learn about the taxes and avoid confusion.