With any job, there is the dreaded tax season. Sorting through your tax information can be a confusing, stressful season for most working professionals. The main purpose of both a W-2 and a 1099 is to report your annual earnings to the government. But a lot of big questions still linger for most travel nurses when they start a new job: should I be a 1099 employee or a W-2 employee? What are the pros and cons of both? We’re here to take you through the definitions of both answer all your questions and hopefully give you a little piece of mind.
1099 Independent Contractors:
What is an independent contractor?
An independent contractor is someone that is self-employed. An independent contractor sets their own schedule and rates and they’re able to determine their own roles and responsibilities within their given contracts. The employees don’t work as a regular, full-time employee might, with regards to management and work as required. Below are the four main types of 1099 forms.
- 1099-DIV: Dividends and Distributions – This form is for individuals that own a stock or mutual fund.
- 1099-MISC: Miscellaneous – This form must be filed for any independent contractor that has several clients, or has been paid over $600 for work.
- 1099-INT: Interest Income – If you have a checking, savings, or another account that pays interest, you should fill out this form.
- 1099-R forms will be filed for any other payment distributions, such as retirement.
Pros of being a 1099 Employee
One of the great benefits of becoming a 1099 contractor is the flexibility and freedom. The ability to choose your own schedule and determine the roles within your job is very appealing to most professionals. 1099 employees also experience more diversified tax deductions.
Cons of being a 1099 Employee
While there are a lot of benefits to being a 1099 employee, there can be some downsides as well. Some companies do not offer their contract employees the same benefits as regular, full-time employees. Another disadvantage is some contract positions and projects are only temporary and it’s the responsibility of the contract employee to find their next job.
W-2 Employees | Full-Time Employees
What is a W-2 Employee?
A W-2 employee is what is considered a traditional employee. W-2 employees receive a salary and work based on the needs of their employer, rather than creating their own schedule, etc. These employees typically receive all of the company benefits of working as an employee such as, healthcare, retirement (401k), etc.
Pros of a W-2
Being a W-2 employee has a lot of great advantages. A W-2 job typically has additional benefits such as overtime, paid time off, etc. With W-2 jobs there tends to be more job structure. This structure can include the scope of roles and responsibilities, a job’s location, procedures, etc.
Cons of a W2
One con of filing taxes as a W-2 employee vs. an independent contractor, is that there might be less flexibility. Additionally, independently contracted employees tend to make more money upfront since they cover their own healthcare, retirement, and other additional costs.
While there are a lot of different options factors in choosing whether to be a W-2 employee or an independent contractor, it all comes down to what you’re most comfortable with. When it comes to filing and preparing your tax documents, it’s always recommended that you seek the help of a tax professional.