Want to hire someone, but don’t really understand the difference between a 1099 and a W2? We’re here to break it down for you.
So, what exactly are a 1099 and a W2?
A 1099 is a tax form that is used to report income that is paid to independent contractors. This form is used to report the amount of money that the independent contractor earned, but no taxes are withheld.
On the other hand, a W2 is a tax form that is used to report income that is paid to employees. This form is used to report the amount of money that the employee earned, and taxes are withheld.
As an employer, there are some potential benefits to hiring independent contractors and issuing a 1099 instead of a W2. For example:
A 2019 study by Upwork and the Freelancers Union found that 57 million people in the United States were freelancers, which is about 35% of the workforce. This suggests that independent contracting is becoming more common, and may be a viable option for employers looking for specialized skills or cost savings.
That in mind, it's important to note that there are legal and regulatory considerations to keep in mind when hiring independent contractors and issuing a 1099.
For example, in the United States, there are specific criteria that must be met in order for a worker to be considered an independent contractor rather than an employee. It's important to make sure you’re properly classifying your workers before you make the hire.
Hiring independent contractors and issuing a 1099 can provide potential cost savings, flexibility, and access to specialized skills. But, it's important to ensure that you are complying with all relevant laws and regulations when doing so.
By understanding the differences between a 1099 and a W2, you can make an informed decision about which option is best for your organization.
If you’re hiring contractors, you’re probably spending too much time on their payroll, contracts, and tax documents. Which is why we built Panther, which saves you 90% of the time you spend on contractor paperwork each month.
With Panther, you can compliantly hire your contractors in 150+ countries, onboard them in minutes, and pay them all at once (in a click). It’s the seamless way to hire and pay.
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