1099 vs W-2: What is the Difference?
If you're a small business owner, creative, coach, or wellness provider, chances are you've brought in help—maybe a VA, a second shooter, or someone to manage your content. But there’s one big question most forget to ask:
👉 Is this person a 1099 contractor or a W-2 employee?
Getting it wrong can lead to IRS penalties, back taxes, and unnecessary headaches during tax season.
Many business owners assume that if they’re just writing a check or sending a Venmo, they’ve got “payroll.” But paying someone ≠ payroll—especially when it comes to taxes and compliance.
Let’s break down what you need to know to classify workers the right way and avoid costly mistakes.
📌 What’s the Difference Between a 1099 and a W-2?
✅ W-2 Employees
You control when, how, and where they work
You provide equipment, training, and oversight
You’re responsible for payroll taxes, unemployment insurance, and benefits
You issue a W-2 and run them through a payroll provider
✅ 1099 Contractors
They run their own business and choose how the job gets done
They bring their own tools and manage their own time
You’re not responsible for tax withholding or benefits
You pay via invoice and issue a 1099-NEC if they earn over $600 in a calendar year
❓ FAQ: Independent Contractor vs Employee
Q: I only hire help a few times a month—do I still need to classify them?
A: Yes. It’s not about frequency, but control. If you direct the work or set expectations, they may need to be classified as an employee.
Q: What if they prefer to be a contractor?
A: Preference doesn’t override IRS rules. If they act like an employee, the IRS expects you to treat and pay them like one—even if they prefer otherwise.
Q: Can I retroactively fix a misclassification?
A: Yes, but act fast. You may need to file corrected forms and pay back payroll taxes. It’s best to catch it early and consult a bookkeeping or payroll expert.
💡 “Classifying workers correctly isn’t just about taxes—it’s about building a solid foundation for your business.”
Dr. Bryan Raya helps small business owners understand payroll vs contractor payments, stay compliant, and protect their business from costly mistakes.
📞 Book a free call with Dr. Bryan Raya today and get your worker classification cleaned up—before tax season gets messy.
Let’s start Doing Business Right.
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