W-2 or 1099? 3 Steps to Help You Understand the Difference

See the three key differences between a W-2 employee and a 1099-MISC worker and what it means for your career.

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Whether you’re freelancing along with your regular work, finding jobs through a staffing agency, or just getting started on your taxes, it can be confusing to know which employment tax form to complete.

When comparing different forms, it’s common for employees to ask themselves if they’re filling out the right one. Your employer will determine which form that is when you first start working with them. Meanwhile, it helps to know some of the key differences between a W-2 employee and a 1099-MISC worker.

The easiest differentiator between the two types of workers is whether taxes are withheld.

  • Workers using a 1099-MISC form are considered self-employed independent contractors. Social Security and Medicare taxes are not withheld, and 1099-MISC workers are required to pay their own taxes—the “self-employment” or “SE” tax.
  • W-2 employees have a percentage of each paycheck withheld by their employer and a portion of their employment taxes are paid for by the company. (For more information, consult the IRS and read more on their website.)

There are a few other key differences between 1099-MISC workers and W-2 employees. PeopleReady shares three key points to keep in mind as you fill out your employment tax forms.

Behavioral control

Does your boss control what type of work you do, when you do it, and how you do it? If yes, the company has behavioral control, most likely deeming you a W-2 employee. If you work through a staffing agency like PeopleReady, you could be a W-2 employee with the agency.

Meanwhile, 1099-MISC workers do not have a boss to whom they report. They are required to find their own jobs and clients, create their own contracts, and manage their tax deductions.

Financial control

Financial control applies to how a worker is paid. In many W-2 scenarios, the employer decides when the worker is paid and for how much. A 1099-MISC independent contractor will define their payment through various contracts dependent on the project and clients they work with.

Relationship with employer

Do you have set length of time you’ll work for the employer, maybe a few shifts or a set several weeks? Or is your time of employment indefinite, as there are no plans on you leaving? Each of these factors can help determine the type of relationship, whether you’re an employee or independent contractor. 

Working through a staffing agency can influence this. You may be a W-2 employee through the staffing agency, since you might work with them for an indefinite period of time.

PeopleReady connects you with available temp jobs

It’s always a good idea to double check with your recruiter or agency representative if you’re not sure of your employment type. You can also meet with a finance expert if you have questions about your tax situation. Meanwhile, PeopleReady and our app, JobStack, give you access to jobs in your local area right now. Jobs we fill include:

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PeopleReady Skilled Trades is a specialized division of PeopleReady, a TrueBlue company (NYSE: TBI). Since 1987, we have connected tradespeople and work across a wide range of trades, including carpentry, electrical, plumbing, welding, solar installations and more. Whether you need a single tradesperson or require a coordinated effort to dispatch skilled workers across multiple projects, we ensure you have the right people with the right tools, on-site and on time.