Everything You Need To Know About A W2 Employee And A 1099 Employee
Most employers have a hard task when deciding to hire employees. There has been an ongoing debate for a long time 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 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. A W2 employee get regular wages and benefits from their employer. Their employers determine the kind of work they do. 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 have the option of flexibility because they determine their time to work and use their skills set. They are the ones who set the amount they wish to charge. They have the option of working for different companies. 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. 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 one who an employer takes time to train, offer the necessary tools for working, provides benefits and pays them regular salary. Employers can withhold taxes from W2 employees and allocate the type of work they are supposed to do.
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. They can work late for you when needed. 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.
Many employers get caught misclassifying employees as being independent workers as opposed to being full-time. This means that you may get 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.