Is W2 or 1099 better for me?

My hourly rate is $20.I was paid via W-2 with no benefits, my boss gave me an option this year to either stay with that arrangement or to get 1099 and get benefits (1 week vacation, 6 sick days and holidays paid). What expenses could I put to balance the extra taxes if I were to choose the 1099 to counter the higher taxes. What would be better in my case.

You are either classified as a W2 employee or you are a self employed contractor. It is not a designation your “boss” makes. The IRS has a 15 point test for contract workers.

What is the nature of the work you do? To be classified as a 1099 worker you need to be in the trade or business, hold yourself out to work for others, have a profit motive, among other tests.

@Dara
I work as a receptionist in a clinic 8 hours a day. I found it weird that they would offer benefits with 1099 when is usually offered with a w-2. They said that I could open a company so I can declare more expenses and get tax reductions . I feel iffy about everything they said, this is my 1st job, so all this tax stuff is new to me :rofl:

@Jules
That is illegal. It’s better for them if you are 1099. It’s better for you if you are W2.

@Jules
They are trying to scam into paying their share of FICA taxes. This is illegal and you can report them. Even if you don’t I would.consider looking for a new job.

@Jules
They’re doing this to reduce their costs, and it’s actually illegal. You could report this anonymously.

@Jules
The place sets the hours and location of work. Sounds definitely W2 to me. But go through the entire IRS contractor checklist.

lol. This is a suckers trap. People who are contractors don’t normally get benefits. Employees do. As others have stated, you don’t get to choose.

Being 1099 or W2 is not a choice. The IRS sets guidelines that you are required to follow. Are you required to work certain hours? Then you must be w2. If you are getting things like vacation and sick days then you cannot be 1099.

You can’t have a choice to be an employee or not. Almost 100% you are an employee and if you are given benefits you 100% can’t be an independent on 1099 so there is no need to analyze the tax difference as won’t participate in tax fraud

W2, you will split 50%-50% social security tax and medicare tax (total 15.3%, employer pays 7.65% and they withheld your part 7.65%) with your employer. With 1099, you will pay self-employment tax at 15.3% on your own. Benefits may be counted into your tax accountability as well, not a free meal at all.

Just make a spreadsheet and compare possibilities.

I know people do this all the time, but from the employer standpoint that is not really legal for 1099 pay. A 1099 contract worker should not be given paid vacation, sick leave, or holiday pay, etc because a 1099 worker has some power over their location and hours.
This is from my state’s Workforce Commision page:

>Set Hours of Work

>An Employee may work “on call” or during hours and days as set by the employer.

>A true Independent Contractor is the master of his or her own time and works the days and hours he or she chooses.

Here’s the first link I found when Googling it. Like I mentioned you can find more official details at your state labor or IRS page
Paid Time Off: Do Independent Contractors Get Holiday Pay?

Almost always w2. Unless there are personal intangibles.

Self-employed people (1099er’s) do not get benefits from their clients. I.e. paid vacation, sick leave or holiday pay.

If your employer is offering this, you would clearly be classified as an employee. OR they are trying to pull something shady.

As others have already said their are specific guidelines the IRS has for you to follow.

@Luca
Maybe this is a stupid question but With a 1099, could take the sick leave , holidays and paid vacation and my employer can put it like I went to work? Is that legal?

Jules said:
@Luca
Maybe this is a stupid question but With a 1099, could take the sick leave , holidays and paid vacation and my employer can put it like I went to work? Is that legal?

No. This is misclassification of labor. They could potentially pay you extra to subcontract for days you need off. But if they don’t allow subcontracting, you paying someone to do your job, then its another reason that you are not a valid 1099 contractor.

Depending on where you’re located, they may be required to give you 6 sick days a year if you’re a W2 employee.

Tell them you’ll take $45/hour for a contract position.

It looks like your boss has done the math and figured out that W2 with no benefits = 1099 with benefits:

1 week PTO (5 days or 40 hours)
6 sick days sick days (6 days or 48 hours)
Paid holidays (usually 8 days or 64 hours)
If you do the math, the paid benefits are 40 + 48 + 64 = 152 hours. Multiply that by $20/hr = $3040 (that’s what your boss will be paying extra for your 1099 benefits).

If your boss paid you W2, at 40 hrs/week, that’s about $40,000 per year if you work 50 weeks. Your boss’ portion of payroll taxes is 7.65% or $3,060.

Your boss thinks he’s being a smartass by doing the math and giving employees options. What he doesn’t know is that you can get him in a whole lot of trouble if you report him to the DOL and/or IRS. From what you’ve described you are an employee, not an independent contractor.

One more thing: depending on your state and city/county, your boss might also be avoiding mandatory benefits that are provided to employees under state/local laws.

Neither you nor your boss get to choose w2 or 1099. The IRS has guidelines as to what your classification is.

Instantly ask for a least a 15% payraise if you go 1099. Trust me and don’t budge.