Are You a 1099 Contractor or W-2 Employee?
If you’re like a lot of people, trying to figure out the difference between being a 1099 contractor or W-2 employee can be confusing. But it’s important to understand the differences as it relates to how you file and pay taxes.
The Difference Between W-2 & 1099 WorkersThe two forms of employment represent two different kinds of worker classifications. 1099 workers are often referred to as independent contractors or self-employed. W-2 workers are directly employed by a company. They receive regular pay, employee benefits and use the W-2 form to report their annual compensation and withheld payroll taxes. When a worker is misclassified, the result can be IRS penalties or even lawsuits against a business.
Advantages of Being a 1099 WorkerThere are a lot of benefits to being a non-employee IT independent contractor:
- Your specialized skills are in high demand by a variety of businesses and industries
- You’re able to set your own work schedule and take on the work you want
- You can choose to work anywhere in the world, including remotely
Advantages of Being a W-2 WorkerSeventy percent of U.S. workers are classified as W-2 employees. They enjoy the job security and benefits that come from working for a company. While there are some limiting aspects to being a W-2 worker, such as not being able to grow your skillset as quickly, most company-employed workers believe the benefits outweigh any disadvantages.
IT Employment: 1099 or W-2?If you’ve searched our job board, you may have noticed positions marked as “Contract”, “Contract to Hire” and “Direct Employee”. Here’s what they mean:
- Contract positions are typically where a client has a gap in a project they need to get done or need a temporary fill-in for someone on leave. This would be a 1099 situation.
- Contract to hire is where you’re basically “auditioning” for a position before being hired as a W-2 employee. It can be beneficial to both parties, as you as a worker get to decide if the company is a good fit before buying in.
- Direct employees are W-2 workers who are either filling a new position or one that has been vacated.