One more thing. Under both arrangements, the employer can reimburse you for legitimate work related expenses on a tax-free basis, as long as you provide adequate proof of the nature of the expense. If you have unreimbursed work related expenses, you can subtract them from your gross income as a contractor but you cannot deduct them as a W-2 employee. If the work you will be doing is likely to require that you provide significant amounts of supplies or materials, then reimbursement for the materials should be included in your contract negotiations.
