1099 vs W-2
Clients want to utilize outside talent (you), but they don’t want to subject themselves to unnecessary risk. With the recent increase in enforcement effort, the IRS is tightening the noose on companies who misclassify workers in their contingent workforce. If either the IRS or State taxing authority determines a worker has been misclassified as an independent contractor when they meet the minimum requirements of a full time W-2, the hiring company is exposed to:
- Hefty financial penalties and fines
- All employer side of taxes since the start of your engagement, even if you paid the taxes yourself
- The equivalent cost of all the employee benefits you would have been entitled to if they had hired you from day one as an employee
- Pay the equivalent value of any pension contributions you would have received had you been hired as their employee
- The cost of vacation and sick pay
Not to mention, undergo a grueling workforce audit. This has pushed companies to take extra precautions to reduce the risk and financial liability associated with misclassified 1099 workers. Fortunately, working as an IProfessional W-2 separates you from the crowd and makes you a more attractive, less risky choice for your client and still allows you to maintain the freedom of a 1099 independent.