What are the Differences Between W2 and 1099-NEC?

What is 1099-NEC?

Who Will Get 1099-NEC?

Independent contractors, gig workers, freelancers, sole proprietors, and self-employed individuals.

Who is 1099 Self Employed?

How are 1099-NEC Self-Employed Taxed?

What Tax Deductions do 1099-NEC Self-Employed Enjoy?

W-2

What is W2?

As an employee, you use w-2 to report your earned income on the form 1040 individual tax return to the IRS.

Who Will Get W2?

If you are a full time or part time employee, you will get W-2 at the end of the year.

Who is W2 employee?

  1. You are in house.
  2. The owner is your employer.
  3. You contribute most of your time in the office.
  4. You have fixed salary regardless how many works your employer assign to you.
  5. You not only earn the salary but also earn other benefits such as pension, health insurance, paid time off etc.
  6. You follow every rules the employer makes.
  7. Employer offer you all the work tool for you to finish you work such laptops, software etc.
  8. The employer will withhold the payroll tax for you.

How are W2 Employees Taxed ?

Besides income tax, you also take 1/2 responsibility of social security and medicare tax.

What Tax Deductions do W2 Employees Enjoy?

  1. Standard Deductions
  2. Itemized Deductions

Itemized deductions includes medical expenses, property tax, donation and mortgage interests.

What is the difference between W-2 and 1099-NEC?


W-2

1099-NEC
WhoEmployeeSelf-Employed
EmploymentIn HouseBy Case
Personal BrandNoYes
TimeTight to the employerFlexible
The owner is yourEmployerClient
Fix SalaryYesNo
Work Result ControlNoYes
Benefits PackagesYesNo
Self-Employment Tax50%100%
Payroll Tax WithholdingYesNo
Business Tax DeductionsNoYes
The Difference between W-2 Employees and 1099-NEC Self-Employed Individuals

Should I get W-2 Form or 1099? Which One is Better?

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