As an employer, you may want to know is 1099 better than W2. You will have to file at least one of the two income tax forms, but it’s more likely you will have to file a combination of the two. Both the 1099 and the W2 have pros and cons. Before answering is 1099 better than W2, we’ll cover more details about each form and explain how a quality tax software makes filing both simple.
What Are the Pros and Cons of 1099?
Employers need to file a 1099 for any independent contractors they pay more than $600 to during the tax season. Independent contractors are not employees on your payroll. Because of this, you do not withhold taxes from their pay since the contractor pays the Self-Employment Tax. So, is 1099 better than W2? There are pros and cons to employing 1099 workers.
Pros of 1099s:
- Less expensive short term– Generally, 1099 contractors are much less expensive to employ than a W2 employee. Employers do not need to provide benefits, training, or supplies to contractors, and contractors handle their own taxes.
- Can work right away- 1099 employees do specialized work for which they are prepared and trained to do. For smaller work that is outside the main function of a business, employers can hire a contractor and not have to spend time instructing someone. Employers can rely on contractors to know what they are doing without having to hire and train a new employee.
Cons of 1099s:
- Little control over the work– If you hire a 1099 contractor, do not expect to have much say over how the work gets done. Unlike an employee on your payroll, contractors work on their own terms.
What Are the Pros and Cons of W2?
Employers file a W2 for employees from whom they withhold certain amounts of their income for taxes. Employers provide W2 employees with some degree of training and protections. Like 1099 contractors, W2 employees have their pros and cons.
Pros of W2:
- Commitment- W2 employees are generally more committed to employers since they depend on the salary and benefits. Employers can count on the employees to stay for a longer time.
- Control over work- Employers have more say over how an employee works. They can train the employee to make sure the work is done the right way and can have regular check-ins with the employee to ensure projects are on track.
Cons of W2:
- More expensive- Employers who hire W2 employees will have to spend more money to account for minimum wage laws, employee benefits, and taxes.
How AMS Can Help With 1099 and W2 Forms
The question of is 1099 better than W2 hinges on your expectations, budget, and work needed as an employer. No matter what types of employees you hire, you will need a reliable tax software to help file the correct forms. AMS 1099 filing software supports any income reporting forms you need and helps keep your individual employee files organized. Try out our software with a free demo and tackle tax season with confidence.