W-2 vs 1099: what’s the difference?
W-2 means you are an employee and taxes come out of every paycheck. 1099 means you work for yourself and handle your own taxes, but you can deduct your business costs.
Employee vs independent contractor
| W-2 employee | 1099 contractor | |
|---|---|---|
| Taxes taken out of pay? | Yes, every paycheck | No, you pay them yourself |
| Social Security & Medicare | You pay 7.65%, employer pays 7.65% | You pay the full 15.3% |
| Business expenses | Generally not deductible | Deductible on Schedule C |
| Quarterly tax payments | Usually not needed | Usually needed |
| Example | Pharmacy cashier, office worker | Uber driver, freelance designer |
Sources: IRS: Self-employment tax · IRS: About Schedule C · IRS: Estimated tax
Same income, different taxes
Two friends each bring in $50,000. Sara is a W-2 office worker: taxes come out of each check, so she rarely thinks about it. Bilal is a 1099 driver: nothing is withheld, but he can subtract his car costs. If Bilal doesn’t set money aside or pay quarterly, he can face a big bill in April.
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Frequently asked
Can I have both a W-2 and a 1099?
Yes. Many people have a job plus side work. Both go on the same tax return.
Is it better to be W-2 or 1099?
It depends on your pay, expenses and benefits. A 1099 worker with many expenses or the right business structure can come out well. Ask our CPA.
Sources: IRS: Self-employment tax · IRS: About Schedule C · IRS: Estimated tax
Figures and rules on this page come from the official and published sources linked above, as of November 2026. People and numbers in the examples are made up to explain the idea. This page is general information, not tax or legal advice for your situation, and laws change; check the linked source or ask a licensed CPA before you act.
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