1099 vs. W2s, What They Mean For Your NY Business
The team at Broadway Suites knows that you need to do what's best for both your business and your employees as an entrepreneur. Today, we'll explore the differences between 1099s and W2s, as they relate to your employees' tax status and that of your company.
Remember, this article is for education and entertainment. We're commercial office space specialists in NY, not professional CPAs. So if you have deeper questions about your business income taxes in NY, it's best to talk to your New York CPA. Now let's get started!
W2 v. 1099 in NYC
First things first: know that it's not legal to pay employees "off the books" or "under the table."
We're not here to tell you how to run your crew, but you must know that here in NY, most traditional employees should be paid via W2.
W2s for Traditional Employees
If your staff member shows up on a set schedule (like 9 am to 5 pm) and uses your equipment or technology (your phone line, your computers), he or she is probably a traditional employee and should be paid using a W2.
You'll need to provide them with a standard paycheck, withhold and submit payroll taxes to the nation and the state, contribute to disability insurance coverage.
As an employer, you'll pay a payroll tax, and you might need to help arrange health insurance coverage for a full-time employee.
Generally, in NY full time is 32 hours a week, aside from a few exceptions.
Traditional employees must always earn minimum wage. Here in NYC, that's $15 / hr.
Examples of traditional employees include cashiers, cooks, or any other standard staff. The good news is the wages you pay an employee are considered a cost of doing business at tax time and significantly reduce your taxable business income.
Maintaining the W2s of a small group of part-time employees can be a minor headache, but software solutions and payroll companies can help. If you have several full-time employees, you'll probably need to staff a human resources (HR) professional or get involved with a payroll service.
1099s for Independent Contractors
Independent contractors aren't employees. They arrive at your office on their schedule and do the work using their tools. You might pay them with a check or cash, but you don't need to withhold any taxes or provide any insurance coverage.
Independent contractors pay self-employment taxes themselves and find their health insurance coverage. Think of them as business owners. Independent contractors usually include salon staff, who set appointments and order supplies as needed. Or, perhaps you have a computer specialist you call upon when you're having tech troubles.
The money you pay to independent contractors is usually tax-deductible as well, as it's a cost of doing business.
At Broadway Suites, our mission is to provide New York's entrepreneurs with premium yet affordable Manhattan office space in Manhattan, complete with Midtown Manhattan mailing address. If you'd like to learn more about doing business in the city, let's talk.