What are the Tax Benefits of 1099 vs W2 Workers?

The tax benefits of 1099 vs w2 workers is the biggest distinction between independent contractors and employees. Employers and supervisors will treat you differently based primarily upon your work title. The reason for the different treatment is that employers navigate payroll taxes and withholding. Inversely, your supervisor as a 1099 worker will have their separate requirements when tax season rolls around.



Whether you are a 1099 worker or W2 employee, you will soon realize that there are certain tax benefits. As you prepare for the next tax season, you should take into consideration the benefits that you, the employee or worker, can expect.


What to Expect During Tax Season

All workers and employees should know their rights in the workplace. During the year, we all tend to focus on what we owe the Internal Revenue Service. We also focus on tax benefits of 1099 vs w2 jobs and what our employers or supervisors should return to us.

Employee Expectations – Your employer must pay you with a net paycheck throughout the year. That means, your employer will take your tax withholdings on a check-by-check basis. Despite the withholdings, employees can benefit from the set-up. They do not need to worry about navigating their own tax liabilities when tax season comes back around.

Independent Contractor Expectations – The Internal Revenue Service views independent contractors as self-employed. As a 1099 contract worker, a benefit is that your supervisor will pay you in full without deductions. However, all contract workers are liable for their own taxes during tax season.

In January, employers should send their employees W2 forms. Supervisors should also send IRS 1099-NEC forms to any 1099 worker who earned $600 or more in the previous year.


Are There Significant Tax Benefits of 1099 vs W2 Workers?

Independent contractors can make the argument that they have little to look forward to when it comes to filing taxes. However, a 1099 worker does possess a couple of notable advantages over W2 employees. One advantage is that independent contractors can put away more money into tax deferred accounts. These accounts can include SEP IRAs. A 1099 worker can also deduct specific business-related expenses on their taxes.

For W2-only earners, you can strategize your tax planning to gain better benefits each year. As a W2 employee, the most efficient way to reduce tax burdens is by making retirement account contributions. If you make traditional IRA contributions, you will find that you can oftentimes deduct them from your taxes.


Why Use AMS Software

As you prepare for tax season, all independent tax filers should invest in reliable software. Our W2/1099 Software lets its users access a complete database system. The system further generates all W2, 1099, and related forms. You will also save additional money by utilizing our e-Filer system. Taxpayers can send their year-end forms directly to the IRS or Social Security Administration. These tax benefits of 1099 vs w2 workers can help to decrease the margin of error that could affect your returns.


Software Solutions from AMS

Our W-2 and 1099 Forms Filer is our only required platform. From there, users pick the services they need. Choose from the tools below to build out your customized accounting software.