Why does an employer prefer to pay via a W2 instead of 1099 (consulting, 2 month project)?

A short answer would be IRS has provided guidance on contractor vs. employee. You can also take a look at form SS8 from IRS. The classification of employee vs. contractor is based on various factors behavioral, financial, the relationship between both parties etc.

Also, employers end up paying unnecessary costs payroll taxes, penalties/interest if they don't classify correctly -so many classify as W2 instead of 1099.


**** Our response to question posted on quora

Posted In: Tax

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