Re: 1099 vs W-2

Subject: Re: 1099 vs W-2
From: Dick Margulis <margulis -at- fiam -dot- net>
To: "TECHWR-L" <techwr-l -at- lists -dot- raycomm -dot- com>
Date: Tue, 16 Jul 2002 17:43:24 -0400

jp wrote:

Hi, guys...

I was just offered a position at a gig I REALLY want. However, while they
will convert me to a W-2, they want me to start as a 1099.

I realize that this is a very open-ended question, but for those who have
previously been a W-2 contractor through an agency and are now a 1099
contractor directly to the employer, what issues have you found?


The IRS has very specific guidelines for keeping such a relationship on the up-and-up. If you are going to be classified as an independent contractor, you have to follow those guidelines. For example, you should provide your own tools (software and hardware), control your working conditions, provide periodic invoices for your services, have an agreement regarding rates, etc. Those are off the top of my head; refer to the IRS guide.

You might also consider whether you want to set up a business entity (I don't know that it has to be a corporation--maybe a DBA would be sufficient) to do the billing and pay you as its employee.

Another major consideration if you decide to go that route is insurance--not just unemployment insurance and disability insurance, but worker's comp, medical, etc. Talk to your agent about getting a package that will cover you for the short period you are on 1099.

There is a lot more to being your own employee than just withholding and FICA.

Even if you just have the money paid directly to you and report it on Schedule C, you still have to be sure you've got the insurance base covered, although I guess the particulars would be different.

Good luck,


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1099 vs W-2: From: jp

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