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 get paid based on the terms of the contract and are self-employed. 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 get to do their job when they want and they rely on their skills. 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.
The main benefit of hiring a 1099 employee is that you don’t have to pay them benefits. You spend a less amount hiring them compared to W2 employees. They provide the flexibility because they are hired when necessary. 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 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 benefit of W2 employees is that they are committed to their work. You can count on them on busy time by having them work late when necessary. You have total control of their schedules.
The disadvantage of W2 employees is that it is not easy to train and manage them. Motivating them is necessary for increased productivity. As an employer, you will be required to offer them the needed tools as well as the 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.
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. Check the IRS requirements to learn about the taxes and avoid confusion.