What taxes does an employeer save when choosing to hire 1099 over w2 employees ? What is the Est.% of Savings

Answer 1

"choose" may not be available.

IRS has a laundry list of questions which test whether someone is an employee [W-4 and W-2 forms] or an independent contractor [1099 form].

If the case does not meet the criteria for IC status, you are required to treat the person as an employee and withhold proper taxes, etc.

the taxes in question are the employer's share of FICA/MediCare [7.65% of gross wages] plus unemployment taxes [6% of gross wages] plus the employee's withholding [which the employee pays].

List is online in the Publications under IRS.gov

GL -- cpa

Answer 2

The employer doesn't just get to "choose" - legally it depends on the work being done, and how much control the hirer has in how, where and when the work is done.

That said, for the same amount of money paid to an employee or a contractor, with the contractor (1099) the person hiring them saves 7.65% for medicare, saves paying into unemployment and workers comp (% varies), and depending on the state, can save additional money.

Answer 3

Legally an employer cannot "choose" this. Many do it illegally though.

Here is an estimated breakdown of average payroll taxes (paid by employer - not withheld from your paychecks)

6.2% of gross payroll = Social Security
1.45% of gp = med (another part of social security)
1 to 10% state unemployment insurance (depends on the employers state & experience rate)
1-5% workers compensation insurance, again depends on state & experience rate
0.8% Federal Unemployment, non-negotiable and can be as high as 4 or 5% if they did not pay state unemployment on time)

Your particular state/local may have other taxes I don't know of.

Keep in mind that if you are a 1099 contractor you are considered a business for YOUR tax purposes. You end up paying the 15.3% social security yourself and still have to pay federal and state income tax (the unemployment & workers comp would not apply). You also will not be eligible for unemployment if let go for any reason.

My suggestion, find a real job.