1099 vs w2 vs C2C

1099 vs w2 vs C2C

Postby levadmin » Sat Jul 17, 2010 7:26 am

In simple terms, 1099 and c2c are similar in the responsibilities the contractor is responsible for within the scope of the relationship between them and LEVERAGEncy (pay 100% of taxes, assumed to provide insurances or buy them from LEVERAGEncy, etc.). The only difference is how LEVERAGEncy reports income to federal, state, etc entities. With a 1099 the income is reported against the contractors social security number (SSN) and with c2c (corporation to corporation) the income is reported against the EIN (federal employer identification number) that is associated to the corporation he works for. C2C is a bit more paperwork to maintain, but there are tax advantages in operating under one of its various forms (LLC, Corp, etc). You would need to talk w/ an accountant familiar with your situation to figure out if its worth it.

W2, or more accurately limited term employee (LTE), is defined by Leveragency covering the mandatory W2 items only (professional insurances, state filings, tax withholdings employer/employee) and the contractor handles the rest (medical, dental, sick leave, vacation 401k etc.). So the contractor can outsource, basically, his tax witholding and professional insurances (Errors & Omissions, General Commercial, Business Auto Non-Owned, and Workers Compensation) and just get a paystub each period and a w2 at the end of the year for his tax filings. Note, going LTE results in the hourly wage to a contractor in a w2 structure for the same job being lower to cover the costs to provide those items. The exact difference varies as the employer taxes are % based on rate but tends to vary from $5-10/hr depending on what you are getting paid gross. A detailed breakdown for your situation can be made on request (ask your agent).
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