1. W2 -- you are an employee. From your income social security and medicare taxes are withheld at 7.65%. You normally can't claim expenses associated with the job unless you itemize your deductions. Also your business related (job related) expenses are subject to 2% AGI limit. 2. 1099 -- you are independent contractor. On your income, you will pay social security and medicare taxes at 15.3%. If you have expenses associated with this job, you file Schedule C on which you record your income and expenses. 3. With 1099, the employer does not have to pay their part of employment taxes of 7.65% and some other taxes. They save headache of keeping another person on their payroll.
by MukatA - 17 hours ago
W-2 means your an employee and your employer can control everything you do. 1099 means your independently contracted to perform a specific service. as an independent you will be responsible for paying all of your own income & social security taxes whereas an employer withholds them for you from your paycheck
by goldenboyblue - 17 hours ago
Generally speaking a person who contracts to provide a service for a company is an independent contractor. Such a person normally uses their own resources such as tools and equipment. They are not supervised by the contracting company personnel. Discontinuing the service contract is the only recourse in most situations. This person's earnings are normally (but not under all circumstances) reported to the individual and the IRS on IRS Form 1099 MISC. Nothing is withheld from the Gross earnings for SS, FICA, Etc. A person working "for" the same company may well have a "W-2 or Employee Contract" which is an agreement between the employee and the company. The agreement is intended to outline the conditions under which the employee will work and what is expected by both the company and the employee. The employee will generally use the resources of the company, have a supervisor and is subject to discipline by the company in accordance with the contract and local labor laws. This person's income will be reported to the individual along with any required withholding on IRS form W-2.
by ? - 17 hours ago
With a W-2, you'd be working as an employee, and they'll take taxes out and pay employer taxes. With a 1099, you're independent, pay your own taxes including both halves of social security and medicare.
by Judy - 17 hours ago
If a W-2, you are an employee so earnings would be treated as such - taxes would be withheld and you would receive whatever normal benefits the company has for employees. If a 1099, you are an independent contractor. No taxes withheld (but you would have taxable income, possibly have to pay estimated taxes, and would include the income on your tax return). No benefits.
by just_the_facts_ma'am - 17 hours ago
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