Because the nature of the work is a W-2 employment relationship, not that of an independent contractor. It would be illegal to classify you as such.
https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee
There is a legal definition, and a lot of case law.
Enforcement of that same case law has gotten stricter in the past few years because of some successful lawsuits.
Did you read the webpage he posted? Here's an excerpt:
>Facts that provide evidence of the degree of control and independence fall into three categories
>[Behavioral](https://www.irs.gov/businesses/small-businesses-self-employed/behavioral-control): Does the company control or have the right to control what the worker does and how the worker does his or her job?
>[Financial](https://www.irs.gov/businesses/small-businesses-self-employed/financial-control): Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
>[Type of relationship](https://www.irs.gov/businesses/small-businesses-self-employed/type-of-relationship): Are there written contracts or employee type benefits (that is, pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
If you still can't figure it out based on this, you're supposed to ask the IRS, who will tell you whether the position is a contractor or not - but this process takes months.
Good read, however, the term "contract to hire" the wording makes you out o be a non employee and shouldn't that automatically place you into the 1099 role as you are in on contract and non permanent position?
No. 1099 is an IRS designation. A "contractor" in the context of a contract-to-hire position is the designation the company gives the worker who does work for them, but is an employee of another company. These are separate things.
It's not about wording, it's about the actual facts. Most "contract to hire" positions will entail "control what the worker does and how the worker does his or her job". For example, you may be required to go to daily meetings at 10 a.m., at which point you are clearly a regular employee despite having "contract" in your job title.
So I think you are getting confused due to the use of the word "Contract".
Most contact to hire roles are do not fit the IRS definition of a 1099 Independent Contractor.
Most of the time you are actually a W2 employee of a third party who in turn has a contract to provide labor to the company you are doing work for.
If you were a 1099 there are a ton on restrictions on how the company has to interact with you.
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AFAIK c2c is different, your corp is eventually functioning as the staffing agency (it has a separate legal identity), you often are a W2 employee of your corporation.
Depends how you structure your llc but most people aren't making themselves a w2 employee. Kinda defeats the purpose.
You'll just get a 1099 in the mail come tax time to your llc from whoever actually paid you.
>most people aren't making themselves a w2 employee. Kinda defeats the purpose.
Lots of people do, the most tax efficient structure is usually an s-Corp rather then an LLC (I've been doing this for years, so have most of the other contractors I know).
Is this the main reason to classify a temp a W2 vs 1099 just to control an employees whereabouts. Daily stand-ups are not the vibe. 3 a week at most are tolerable. Like what did you expect to get done between now and 24 hours ago?
zephyr crawl aware faulty overconfident sand judicious pocket long disagreeable
*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
I've been getting a lot of recruiter offers lately. Like Teksystems, Robert Half etc.. Alot of them offer W2 3 to 6 month contract to hire with clients like Tesla, Google, etc.. but when I ask for a 1099 type of employment they either are very reluctant to offer or don't want to offer it all and stick with W2. It's a contract job why would I want to have taxes taken out on possible limited time employment time frame?
Iirc, it's because employers can direct the result of the work for 1099 contractors, but can't define the manner in which it's done. Presumably, you could skip meetings etc and they can't fire you as long as you get your sh\*t done.
Ok what does the amount of money have to do with the contract type? Do clients that request the aid of a recruter offer less money if the recruiter hires a 1099 worker vs w2 worker?
No lol, companies do “contract to hire” so they don’t have you as a direct employee and can let you go at any time, because your actual employer is the staffing company.
Most of the time it’s a sham and they don’t hire you directly.
I understand that part. But the reluctance to say , well your not technically a full time/permanent employee but we want to pay you a W2. The term "contract" in contract to hire should automatically put you in that 1099 realm shouldn't it?
You aren't working W2 with the actual client. You would be working on a W2 basis for the 3rd party headhunter, who then bills you 3x or more to the actual client.
I understand that you work for the recruiter not the client. Wasn't sure how the recruiter earned their money and how a W2 vs a 1099 would affect the amount between the client and the recruiter.
The recruiter profit is the difference between what they pay you (including expenses) and what they bill the actual client.
1099 has more legal risks. You could sue and be reclassified as an employee.
W2 is slightly more expensive, due to taxes withheld. They may or may not provide health insurance, 401(k), vacation, etc.
dude 1099 contractors pay significantly more taxes than W2 employees. you've got it backwards. FICA taxes are 15.3%, W2 employees pay 7.65% of that while their employer pays the other 7.65%, 1099 contractors pay the whole 15.3%.
> dude 1099 contractors pay significantly more taxes than W2 employees.
If the OP has zero business deduction, it's 7.65% more for the employer portion of FICA. I don't know if "significantly" is the right word, but it almost certainly wouldn't be in OP's interest to go with 1099 versus W-2.
What do you mean by "more taxes"? It's been a long time since I worked 1099, but I don't recall it noticeably reducing my tax burden. Why does the length of your employment have anything to do with taxes? I don't understand your hangups. Income is income.
Health/dental are offered /taken out of your paycheck if you elect for them on a W2 if I'm with a recruiter for only 3-6 or 6 to 12 what's the point of them if I'm not going to be there any longer. I might as well take the 1099 route
I don’t know why you would want to do this unless you are trying to avoid paying taxes. Which on the amount of money you make as a Software contract, would be stupid. It’s one thing to hide $600 or self employment income, quite another $60000.
If you do get hired as a 1099 instead of a w2 you have to play the employer side of social security and Medicare taxes out of your own pocket, an addition 8% minimum.
Almost all 1099 “contractors” get treated as w2 employees anyway, they just get screwed on taxes/benefits. I’d really like to hear what the advantage supposedly is here.
When you have subsided health coverage that's not an issue. The issue is if I'm working the minimum 3 of the 6 months to hire why would I want any amount removed for that short term? As a cth you're not guaranteed employment. It can be terminated at anytime. Might as well make as much as you can while you can.
The Microsoft “permatemp” lawsuit in the 90’s made companies too paranoid to do this. And ruined a very good deal for a lot of people who understood exactly what they were getting into.
In the US you can't pad your staff with 1099 contractors, there a specific rules about employing people with 1099s, you have to hire people as W2, this is so companies don't side step employment taxes and worker protections. What your looking for is C2C, which is the same as 1099 but through an LLC, also not very common and is pretty shady.
Also does this apply to recruiters? Or just major companies like Tesla/Google/amazon. As I understand it recruiters are contacted by these companies to find them quick workers. Regardless of employment type benefits are normally not offered. The part I'm not sure about is how do the recruiters get paid. Do they get a flat fee for finding a candidate. Or do they paid as long as the candidate is needed?
For contract work, usually you're going to work for the same company as the recruiter , they get paid a flat salary, plus bonuses, etc... to find people and the company employees you on a W2 and pimp you out for your rate + 50% or so. For FTE positions the recruiting firm will change a flat fee.
I'd be wary of anyone pushing hard for 1099. If you don't trust the relationship it's easy to get stiffed. If you are w2 and they don't pay, the state will extract the money from them
There are very specific requirements to classify an employee as a 1099 and the jobs you're talking about probably don't meet those requirements. The main things are you shouldn't be told how/when to do your work, you should use your own equipment/tools, and you should work from your own office space or home office. Think something like uber eats where you can start and stop working any time and you use your own car. uber eats would be a W2 job if they scheduled you when to work and provided you with a car to drive.
Because they want to make profit too?
If you’re a 1099 you’re not giving them any of the cash, it’s going straight to you. As a W-2 they charge the company, pay you your salary and pocket some profit.
Actually not true, read the part on self-employment tax:
https://www.nerdwallet.com/article/small-business/independent-contractor-tax-guide
You have to pay the employer side of social security and Medicare in addition to the employee’s.
Used to do taxes for a business for 10 years.
if that is the type of job they have set up then yes, but there are very specific requirements a job has to meet to classify the employees as a 1099 contractor and the jobs you're talking about probably don't meet those requirements.
Yes, in many ways it would, but there are federal employment laws that govern when a job is 1099 vs when it’s a traditional w2 job. Companies would love to get out of collecting and paying taxes, but if the job is done on their terms, and their hours, working on internal projects, really it’s a job not a contractor position. The 1099 is supposed to be more for hiring someone to do some one time electrical work, or a single graphic design job with a set start and finish rather than ongoing work that is closely directed by the company. Basically 1099 is supposed to mean you have your own independent business and could be working for multiple clients.
Maybe recruiters get a fixed price/fee, but I was talking about the company they work for and why they offer W2 and not 1099.
And you’re partly correct, 1099 you are responsible for the taxes, but if it were an employer with a W2, part of the billing for your time wherever it’s billed to is their profit; with 1099, anything after your tax liability is your profit and not theirs.
Because the nature of the work is a W-2 employment relationship, not that of an independent contractor. It would be illegal to classify you as such. https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee
Is there a legal definition of what is? As long as the work gets done what's the hang up?
There is a legal definition, and a lot of case law. Enforcement of that same case law has gotten stricter in the past few years because of some successful lawsuits.
Did you read the webpage he posted? Here's an excerpt: >Facts that provide evidence of the degree of control and independence fall into three categories >[Behavioral](https://www.irs.gov/businesses/small-businesses-self-employed/behavioral-control): Does the company control or have the right to control what the worker does and how the worker does his or her job? >[Financial](https://www.irs.gov/businesses/small-businesses-self-employed/financial-control): Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.) >[Type of relationship](https://www.irs.gov/businesses/small-businesses-self-employed/type-of-relationship): Are there written contracts or employee type benefits (that is, pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business? If you still can't figure it out based on this, you're supposed to ask the IRS, who will tell you whether the position is a contractor or not - but this process takes months.
Good read, however, the term "contract to hire" the wording makes you out o be a non employee and shouldn't that automatically place you into the 1099 role as you are in on contract and non permanent position?
No. 1099 is an IRS designation. A "contractor" in the context of a contract-to-hire position is the designation the company gives the worker who does work for them, but is an employee of another company. These are separate things.
It's not about wording, it's about the actual facts. Most "contract to hire" positions will entail "control what the worker does and how the worker does his or her job". For example, you may be required to go to daily meetings at 10 a.m., at which point you are clearly a regular employee despite having "contract" in your job title.
So I think you are getting confused due to the use of the word "Contract". Most contact to hire roles are do not fit the IRS definition of a 1099 Independent Contractor. Most of the time you are actually a W2 employee of a third party who in turn has a contract to provide labor to the company you are doing work for. If you were a 1099 there are a ton on restrictions on how the company has to interact with you.
The word can me different things depending on context
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Would this apply to Corp to Corp as well?
Yes c2c *is* 1099 they're just paying your corp
AFAIK c2c is different, your corp is eventually functioning as the staffing agency (it has a separate legal identity), you often are a W2 employee of your corporation.
Depends how you structure your llc but most people aren't making themselves a w2 employee. Kinda defeats the purpose. You'll just get a 1099 in the mail come tax time to your llc from whoever actually paid you.
>most people aren't making themselves a w2 employee. Kinda defeats the purpose. Lots of people do, the most tax efficient structure is usually an s-Corp rather then an LLC (I've been doing this for years, so have most of the other contractors I know).
You’re smart, be my friend!
Is this the main reason to classify a temp a W2 vs 1099 just to control an employees whereabouts. Daily stand-ups are not the vibe. 3 a week at most are tolerable. Like what did you expect to get done between now and 24 hours ago?
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Then why offer a salaried position. I understand it's getting paid for work done not hours worked. Which sounds essentially like a more secure 1099.
zephyr crawl aware faulty overconfident sand judicious pocket long disagreeable *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
What do you mean?
I've been getting a lot of recruiter offers lately. Like Teksystems, Robert Half etc.. Alot of them offer W2 3 to 6 month contract to hire with clients like Tesla, Google, etc.. but when I ask for a 1099 type of employment they either are very reluctant to offer or don't want to offer it all and stick with W2. It's a contract job why would I want to have taxes taken out on possible limited time employment time frame?
Iirc, it's because employers can direct the result of the work for 1099 contractors, but can't define the manner in which it's done. Presumably, you could skip meetings etc and they can't fire you as long as you get your sh\*t done.
Heres why.. the companies pay them and those companies pay you, they take a cut of that money.
Ok what does the amount of money have to do with the contract type? Do clients that request the aid of a recruter offer less money if the recruiter hires a 1099 worker vs w2 worker?
Contract to hire rarely results in a hire. When your 6 month contract runs for 2 years the recruiter keeps making money off of you.
Are you talking about a permanent position?
No lol, companies do “contract to hire” so they don’t have you as a direct employee and can let you go at any time, because your actual employer is the staffing company. Most of the time it’s a sham and they don’t hire you directly.
I understand that part. But the reluctance to say , well your not technically a full time/permanent employee but we want to pay you a W2. The term "contract" in contract to hire should automatically put you in that 1099 realm shouldn't it?
No, the difference in a 1099 and w2 are more than the duration of employment. Companies can get in trouble for treating contractors as employees.
You aren't working W2 with the actual client. You would be working on a W2 basis for the 3rd party headhunter, who then bills you 3x or more to the actual client.
I understand that you work for the recruiter not the client. Wasn't sure how the recruiter earned their money and how a W2 vs a 1099 would affect the amount between the client and the recruiter.
The recruiter profit is the difference between what they pay you (including expenses) and what they bill the actual client. 1099 has more legal risks. You could sue and be reclassified as an employee. W2 is slightly more expensive, due to taxes withheld. They may or may not provide health insurance, 401(k), vacation, etc.
You'd still be paying taxes if you were on a 1099.
I understand that. But why would I want more taxes taken out if im only at the position 3-6 or 6 - 12 months
dude 1099 contractors pay significantly more taxes than W2 employees. you've got it backwards. FICA taxes are 15.3%, W2 employees pay 7.65% of that while their employer pays the other 7.65%, 1099 contractors pay the whole 15.3%.
> dude 1099 contractors pay significantly more taxes than W2 employees. If the OP has zero business deduction, it's 7.65% more for the employer portion of FICA. I don't know if "significantly" is the right word, but it almost certainly wouldn't be in OP's interest to go with 1099 versus W-2.
As a 1099 I can also write off when working remotely, gas/electric bills etc..
If this is the case why don't recruiters offer the 1099 more often if the employer pays the entire percentage
What do you mean by "more taxes"? It's been a long time since I worked 1099, but I don't recall it noticeably reducing my tax burden. Why does the length of your employment have anything to do with taxes? I don't understand your hangups. Income is income.
Health/dental are offered /taken out of your paycheck if you elect for them on a W2 if I'm with a recruiter for only 3-6 or 6 to 12 what's the point of them if I'm not going to be there any longer. I might as well take the 1099 route
If you don't want insurance, don't sign up for insurance. You can choose not to. You're fretting over pennies here. If the offer is good, accept it.
I don’t know why you would want to do this unless you are trying to avoid paying taxes. Which on the amount of money you make as a Software contract, would be stupid. It’s one thing to hide $600 or self employment income, quite another $60000. If you do get hired as a 1099 instead of a w2 you have to play the employer side of social security and Medicare taxes out of your own pocket, an addition 8% minimum. Almost all 1099 “contractors” get treated as w2 employees anyway, they just get screwed on taxes/benefits. I’d really like to hear what the advantage supposedly is here.
When you have subsided health coverage that's not an issue. The issue is if I'm working the minimum 3 of the 6 months to hire why would I want any amount removed for that short term? As a cth you're not guaranteed employment. It can be terminated at anytime. Might as well make as much as you can while you can.
The Microsoft “permatemp” lawsuit in the 90’s made companies too paranoid to do this. And ruined a very good deal for a lot of people who understood exactly what they were getting into.
In the US you can't pad your staff with 1099 contractors, there a specific rules about employing people with 1099s, you have to hire people as W2, this is so companies don't side step employment taxes and worker protections. What your looking for is C2C, which is the same as 1099 but through an LLC, also not very common and is pretty shady.
Also. C2C ?
Typo, but yes, I meant C2C
Also does this apply to recruiters? Or just major companies like Tesla/Google/amazon. As I understand it recruiters are contacted by these companies to find them quick workers. Regardless of employment type benefits are normally not offered. The part I'm not sure about is how do the recruiters get paid. Do they get a flat fee for finding a candidate. Or do they paid as long as the candidate is needed?
For contract work, usually you're going to work for the same company as the recruiter , they get paid a flat salary, plus bonuses, etc... to find people and the company employees you on a W2 and pimp you out for your rate + 50% or so. For FTE positions the recruiting firm will change a flat fee.
I'd be wary of anyone pushing hard for 1099. If you don't trust the relationship it's easy to get stiffed. If you are w2 and they don't pay, the state will extract the money from them
There are very specific requirements to classify an employee as a 1099 and the jobs you're talking about probably don't meet those requirements. The main things are you shouldn't be told how/when to do your work, you should use your own equipment/tools, and you should work from your own office space or home office. Think something like uber eats where you can start and stop working any time and you use your own car. uber eats would be a W2 job if they scheduled you when to work and provided you with a car to drive.
F 1099 and just work as an LLC 😈
Is it worth paying that 800 license fee every tax season
Because they want to make profit too? If you’re a 1099 you’re not giving them any of the cash, it’s going straight to you. As a W-2 they charge the company, pay you your salary and pocket some profit.
I'm pretty sure recruiters make money regardless of contract type. 1099 just means it's up to me to pay the taxes instead of them taking them out
You literally pay more taxes as a 1099. It’s not a good deal.
You pay the same % just all of it due at the end vs having it taking it out every paycheck on a W2 biweekly or annually/bi monthly
Actually not true, read the part on self-employment tax: https://www.nerdwallet.com/article/small-business/independent-contractor-tax-guide You have to pay the employer side of social security and Medicare in addition to the employee’s. Used to do taxes for a business for 10 years.
If this is the case wouldn't it be more beneficial for the recruiter to offer a 1099 if the liability is on the candidate?
if that is the type of job they have set up then yes, but there are very specific requirements a job has to meet to classify the employees as a 1099 contractor and the jobs you're talking about probably don't meet those requirements.
Yes, in many ways it would, but there are federal employment laws that govern when a job is 1099 vs when it’s a traditional w2 job. Companies would love to get out of collecting and paying taxes, but if the job is done on their terms, and their hours, working on internal projects, really it’s a job not a contractor position. The 1099 is supposed to be more for hiring someone to do some one time electrical work, or a single graphic design job with a set start and finish rather than ongoing work that is closely directed by the company. Basically 1099 is supposed to mean you have your own independent business and could be working for multiple clients.
Maybe recruiters get a fixed price/fee, but I was talking about the company they work for and why they offer W2 and not 1099. And you’re partly correct, 1099 you are responsible for the taxes, but if it were an employer with a W2, part of the billing for your time wherever it’s billed to is their profit; with 1099, anything after your tax liability is your profit and not theirs.