1099 v. W-2
Contractor (1099) v. Employee (W-2)
Generally, workers are classified as either independent contractors or employees. Employees receive W-2s, and the employer withholds taxes and pays employment taxes or makes contributions to federal and state governments. Independent Contractors receive 1099s that report the compensation paid for services performed. The employing unit generally does not withhold or pay taxes with respect to its independent contractors.
Federal and state authorities have developed several tests for determining whether a worker should be classified as an employee or an independent contractor. No single test applies uniformly; the factors frequently are analyzed subjectively. A wrong decision on classification could subject an employer to substantial liabilities.
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