Differences between paid with a W-2 and a 1099:
W-2
- Income taxes withheld from every paycheck
- Your portion of social security and medicare taxes are withheld from your paychecks
- The employer pays 1/2 of the total social security and medicare taxes (7.65%)
- Any unreimbursed expenses will only be deductible if you itemize your deductions, and then only to the extent that they exceed 2% of your adjusted gross income (AGI)
- You are covered by unemployment, which is paid for by the employer in the form of payroll taxes
- You are generally covered by workman's compensation insurance
- Potential for employer-paid or subsidized benefits
1099
- No taxes are withheld - you will generally pay estimated taxes every quarter
- You will pay the full amount of social security and medicare taxes (called self-employment taxes) at 15.3%
- Any expenses related to the income you earn are fully deductible on schedule C as business expenses
- Unemployment benefits are generally unavailable to a self-employed person who no longer earns income from their business
- You are covered by workman's compensation insurance only if you are willing to purchase a policy
However, whether you are an independent contractor (1099) or an employee (W-2) is not generally a matter that is a "choice" made by the employer. There are specific guidelines that determine the employment relationship that exists between you and the company paying you. A few of these things are whether the company controls when and how you do your job, who determines pay schedule and what you are reimbursed for, and whether there are benefits offered. More information on this can be found at https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-o...
