Employment status

What are the disadvantages of freelance reporters receiving W-2's (as opposed to 1099's), if any?  I realize most freelance reporters receive 1099's, but a few firms still issue W-2's.  I'm curious what specific advantages and disadvantages may be applicable to each.

If you receive a W-2, that means that you are an employee, not an independent contractor (1099).

As an employee, it also means that they take withholding out for you and forward it to the IRS & your state tax authority.  Also, they pay 50% of your Social Security and Medicare taxes.

If you are an independent contractor, you must pay your withholding quarterly (called an estimated tax payment) to both the IRS & state tax authority.  You also will be subject to self-employment tax on your net profit.  This is 100% of your Social Security and Medicare taxes.

As an employee, it is a lot harder to write off your business expenses.  There are several limitations in place that you must exceed in order for you to be able to write off your expenses.

As an independent contractor, you are going to report all of your income and expenses on a Schedule C.  This way, you are able to deduct almost everything that you spent related to your business, including your mileage. 

Which one is better (employee vs. independent) is hard to say.  It depends on the amount you make, and whether or not you're disciplined enough to keep track of your income, expenses, making your estimated payments on time, etc....If you don't keep track of all this, and make your quarterly payments, then you're going to be paying taxes on more income than you need to, and you'll be paying penalties on top of that for not making timely payments.

I hope this helps somewhat.

I didn't know that a firm could give a freelance reporter a W-2, unless they are taking out federal and state taxes.  Very interesting question.  Can't wait for responses.  What state are you in?

There are some firms that want to treat you like an employee but give you the benefits of an indepdent contractor...no benefits!

I have been both, employee and independent contractor.  I think, in my humble opinion, there are a few very big benefits, pun intended, to being an employee:  Insurance and W-2's, as opposed to having to take care of all your own withholding and such.  At my current firm, I have a great health insurance plan, 401k, and some other benefits.  At my IC firm, I had nothing, and as a single mom of two kids, that's no bueno!

I don't notice any difference as far as job status goes, such as taking what I want versus being told what to take, et cetera.  I can ask off just the same as I did as an IC.  I can cover for other firms, the same as I did for IC.  I don't notice anything amiss as far as that goes.

Hope this supplements.  :)

I have also been both and know that there's a definite discrepancy in income being an employee versus and independent contractor.  I make more as an IC than an employee.   The firms I worked at as an employee provided NO benefits, other than they withheld the taxes from your pay and sent it in.  No insurance, no 401K, etc.  And you absolutely could not work for another firm.  I've worked for IC firms that did not allow you to work for other firms as well - those are the ones that should be reported to the IRS!

However, as an independent contractor I can incorporate my business and enjoy the tax benefits of a corporation.  As an employee of my own corporation, I have a cafeteria plan and so can set aside money for medical care, childcare, etc., that is not taxed.  

Naola

Oh, that's what I forgot to cover!  The only thing I'm not allowed to claim that I did when I was independent is mileage from my home to the job.  Now I have to calculate all mileage from my firm's office to the job, but I still get to deduct mileage, all supplies, all continuing ed, all equipment, tolls, all that stuff.  Feel free to ask about specific things.  I'm pretty well-versed in tax stuff.  YAY.  LOL