Employee (W-2) or Independent Contractor (1099-NEC)? How to Determine and What to Choose?
You are a company employee and should be on a W-2 if you:
- Work according to a schedule set by the employer.
- Are provided with everything necessary for the job (equipment, tools, materials, technology).
- Have taxes withheld from every paycheck. The employer pays half of the social security and Medicare taxes for you.
- May be provided with benefits from the employer in the form of paid health insurance, retirement plans, and HSA/FSA contributions.
- Do not incur any work-related expenses, and consequently, do not deduct anything when filing your tax return.
- Form W-2 is issued by January 31st and contains information on the amount of income, taxes withheld, and benefits received.
You are an independent contractor and receive a 1099-NEC if you:
- Have a flexible work schedule and choose when to work and on which projects.
- Buy everything necessary for your work yourself and consequently have the right to deduct expenses when filing your tax return.
- Are personally responsible for your taxes.
- Form 1099-NEC is also issued by January 31st and contains only the total amount of compensation paid for your work during the year.
