Which is the best arrangement for independent computer consultants – 1099 contractor or W-2 hourly employee?
Many agencies and consulting firms will give you the option of being a 1099 contractor or W-2 hourly employee. The term “1099” refers to the tax form that clients send to their contractors at the end of each calendar year. Even if you are already incorporated, there may be compelling reasons to choose working as a W-2 hourly employee over working as a 1099 contractor. If you choose 1099, then you will submit periodic invoices with timesheets and expense reports and be paid as any other vendor would. Terms are typically 30 days. If you choose W-2, then you will be paid from the company’s payroll system, typically once a week or once every two weeks. You will not need to submit an invoice. I always try to get hired as a W-2 hourly employee, even though I have my own limited liability company. The rates for W-2 hourly employees are usually 10% to 15% less than for a 1099 contractor. The main reasons to choose W-2 are 1) as a W-2 hourly employee, your employer pays the employer portion of
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