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.
When filing for taxes you need to make a distinction of whether your employees are W2 or 1099. A 1099 employee is required to fill a 1099 form. 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 determine the kind of work they do. 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 charge a cost that they find suitable. They have the option of working for different companies. However, depending on the job they do their taxes can be withheld from their pay check.
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. 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. Since companies don’t provide insurance cover or 1099 employees, in case of any injury they can sue you.
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 greatest advantage of hiring W2 employees is that they become loyal to the company since they want to keep their jobs. You have the advantage of counting on them during busy times. You have total control of their 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. You also have to provide the workspace and the necessary tools. You also need to pay their wages, social security, sick leave, Medicare taxes and other benefits.
Majority of employers make the mistake of misclassifying their employees as independent contractors. This can cause harsh penalties. You need to be able to distinguish between the two. To avoid confusion, ensure you know the IRS requirements.
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