In my job search, I am seeing a lot of references to W2 contracts and 1099 contracts. I assume W2 means working for a contracting company and 1099 is as an independent contractor, but I am not real sure. Could someone explain the differences?
2007-09-10 03:49:40 · 1 answers · asked by advnturer 6 in Business & Finance ➔ Taxes ➔ United States
You are correct.
W-2 means:
1. Social security, medicare, and income tax are withheld
2. The company pays 1/2 of social security and medicare and must carry workmen's compensation coverage
3. Your earnings count towards eligibility for future unemployment compensation
4. If you do not get paid, the government may be able to assist for free
5. You are protected by FMLA, COBRA, etc., laws.
1099 means:
1. No taxes are withheld
2. You must pay estimated taxes and self-employment taxes
3. Your earnings do not count towards eligibility for future unemployment compensation
4. If you do not get paid, it is a breach of contract issue rather than an unpaid wage issue, so you have to sue
5. If you are injuried, compensation for your injury is much less likely.
6. You are not protected by FMLA, COBRA, etc., laws.
2007-09-10 08:25:14 · answer #1 · answered by StephenWeinstein 7 · 19⤊ 0⤋
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.
2007-09-10 04:15:59 · answer #2 · answered by ? 6 · 2⤊ 0⤋
Form W-2 is a form that the employer must submit on each employee paid wages during the year. A copy goes to the federal gov't, state govt, some cities, and to the employee himself. The W-2 shows: wages paid, fed tax withheld, state tax withheld, city tax withheld (if any), also shown is the amount of FICA (social security) withheld. Form 1099 comes in several versions, and is used to report to the same people reported to above. It does NOT usually contain employee information, unless there was taxable compensation that were not received in wages. There is a Form 1099MISC, for reporting misc non wage income like personal use of company car. There is also a 1099 issued for anyone who was paid a dividend during the year. It is safe to say that 1099 are used to report all non wage compensation (if taxable). Hope this helps
2016-03-18 01:21:02 · answer #3 · answered by Anonymous · 0⤊ 0⤋
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W2 comes from an employer and shows taxes paid in and a 1099 shows income without taxes withheld. Mary in Camden, MI
2016-04-04 21:15:02 · answer #4 · answered by Anonymous · 0⤊ 0⤋
W2 Definition
2016-12-13 05:43:44 · answer #5 · answered by ? 4 · 0⤊ 0⤋
W2 Employee
2016-10-30 21:13:06 · answer #6 · answered by ? 4 · 0⤊ 0⤋
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.
2007-09-10 03:54:39 · answer #7 · answered by just_the_facts_ma'am 6 · 1⤊ 0⤋
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.
2007-09-10 04:07:23 · answer #8 · answered by Judy 7 · 1⤊ 0⤋
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.
2007-09-10 04:58:42 · answer #9 · answered by MukatA 6 · 4⤊ 0⤋
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
2007-09-10 05:41:41 · answer #10 · answered by goldenboyblue 3 · 1⤊ 0⤋