Merits of 1099 Tax Forms
In the running of the business, there are various measures that the business entity puts in place to ensure that it has the maximum profits. The kind of measures include the various methods of hiring employees and also coming up with various projects that are profitable to the business. Normally, there are various types of employees in any business entity. The independent contractors as well as the non-independent or long term employees are some of the different types of employees. The two different kinds of workers that exist in the business entity have different kind of cases and also their payment methods are very different. The explanation for this is because the independent contractors are catered for by the 1099 forms while the long term employees tend to be catered for by the W-2 forms.
There are huge differences that do exist between the 1099s and the W-2 forms. One of the huge differences is the fact that the W-2 forms tend to only cater for the needs of the employees while the 1099s do cater for the contractors and the subcontractors as well that tend to be independent. The employees do control the method unlike the independent contractors and the subcontractors who do not control the method. The purpose of the 1099 tax forms is that of the non-employment income. More to this, the individuals who receive the W-2 forms are on the employee payroll unlike the 1099s who are not on the employee payroll.
The 1099s are associated with a lot of merits. The advantage is that for one, the contractors receive a lot of money since the 1099s do not withhold the taxes. The fact that these contractors are able to receive the full amount of tax income is the meaning of these. The contractors prefer to use the 1099s compared to the W-2 forms which tend to withhold taxes in order to get more money than the employees. The independent contractors that do come up with the small scale businesses dealing with retirement plans choose to have the option of deferring their income which is not allowed when it comes to the W-2 forms.
Another benefit of the 1099s to the clients is that they find this as the simplest and easiest way of filing their forms. The people referred to as the clients are the subcontractors or the employees who are employed only for a short period of time and who are as well not permanent. While paying the contractors with the 1099s, the clients do not have to withhold the taxes. There is no withholding or even paying of the social security as well as the unemployment income. There is also no need for the clients to provide training to the subcontractors which eases their work.
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Merits of 1099 Tax Forms