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W2-vs-1099: HOW TO PAY YOUR TEAM
As a tax strategy company, one of the most frequent questions we get from our clients is the difference between W-2 and 1099 and which is best for their business. Whether you are a business owner or an employee, trying to understand which to choose can be overwhelming. Still, it is essential that you figure out the basics and the effect of how both are taxed.
The typical difference between a W-2 and a 1099 is that while a W-2 is used for employees, a 1099-MISC is used to report a payment made to an independent contractor. But there’s much more to it than just the basics.
The difference between a W-2 and a 1099 goes beyond how you file taxes. Let’s be honest. Starting with 1099 contractors could be a smart step to help your business grow without saddling yourself with the responsibility of FICA, and Medicare.1099 offers many benefits for employers and employees, but this does not mean that the W-2 is without any benefits. It’s important to know which best fits your business or location because the twist here is that 1099 doesn’t apply in all states; for example, California has effectively mandated that only people in the acting industry can file 1099. This would adversely affect independent contractors from all other sectors.
Discover the complexities of W-2 and 1099 and which is best for you and your business in this document. If you have questions about choosing a W-2 or 1099 for your business, don’t hesitate to book a free call with us at Tax Goddess.