The Ins and Outs of 1099 and W2 Employees: What You Need to Know
Hiring the right employees is a critical decision for any business. Two common classifications for employees in the United States are 1099 employees and W2 employees. These classifications have distinct implications for taxation, benefits, and legal responsibilities. To make informed choices regarding your workforce, it’s crucial to understand the differences between these two types of workers.
What Are 1099 and W2 Employees?
Let’s begin with definitions:
– 1099 Employees: These are independent contractors who work on a project-by-project or contract basis. They are responsible for handling their own taxes and do not receive benefits like health insurance or retirement plans from the company they work for.
– W2 Employees: In contrast, W2 employees are traditional employees who work on a regular basis. They enjoy benefits such as health insurance, paid time off, and retirement plans. The employer withholds taxes from their paychecks.