The Benefits of HMW vs.
1099 Classification
| 
|
Help
Me Work
(Paid on W-2)
|
1099
(Paid on 1099-Misc)
|
| Accounting
& Management: Who is responsible?
|
| Credit Risk |
Help Me Work (if client passes
credit check) |
Consultant |
| Establish Contract With Client |
Help Me Work |
Consultant |
| Bill Client |
Help Me Work |
Consultant |
| Collects Money
From Client |
Help Me Work |
Consultant |
| Manages Client Purchase
Orders
|
Help Me Work |
Consultant |
| Employment
Features & Benefits |
| Unemployment Coverage
Between Work |
Yes |
No |
| Workers Compensation
Coverage |
Yes |
No |
| Health Insurance |
Group |
Individual |
| Dental Insurance |
Group |
Individual |
| Life Insurance |
Group |
Individual |
| E&O / Professional
Liability insurance |
Yes |
Costly for Individuals |
| 401(k) Plan |
Yes |
No |
| Flexible Spending Plan
(Section 125 Cafeteria Plan) |
Yes |
No |
| Holiday Pay |
Yes |
You Don’t Work, You Don’t Get Paid |
| Vacation Pay |
Yes |
You Don’t Work, You Don’t Get Paid |
| Steady Paychecks When
on Assignment |
Yes |
Depends on Client Payment Schedule |
| Direct Deposit of Payment
|
Yes |
No, Unless Client Makes Electronic Payments |
| Tax Benefits |
| Estimated Tax Payments |
Employee Tax made Through Payroll Deductions. Employer
Tax made by HMW. All Payments Considered Timely Without
Penalty (unless under withheld) |
Individual Must Save From Client Payments and Remember
to Make Quarterly Tax Estimates. Individual Must Pay
Employer Tax Portion. |
| Pre-Tax Plans |
401(k) and Flexible Spending Account Are Both Pre-Tax
Thus Reducing Your Taxes
|
Can Establish Own Retirement Plan, But Time Consuming
and Could Be Complicated |
| Other
Benefits |
|
Longevity of Employment
for Credit Purposes |
Lenders Look More Favorably on Applicant When Employed
by a Business. They Will Verify Employment and Pay Stub |
Lenders Scrutinize Independent Workers More Than
Employees.
Many Lenders Require 3 Years of Tax Returns.
|
| Business Structure Acceptable
to Large Corporations? |
Yes. Large Corporations Are Concerned About the
Risk of Paying Individuals |
Many Large Corporations Will no Longer Contract
With Individuals or Sole Proprietors Due to Costly Misclassification
Penalties and Taxes |
|
IRS Audit |
Lower risk with an employer of record |
Unknown risk as a 1099 |
