I have option of W2 and 1099. Is there any body who can help me out? I am single, no idea about taxes. Which one should I pick. How should I fill my W4? to save maximum at the end of the year? I have been through the Irs site, could not make much out of it. I know W2 I keep paying monthly so that I dont have burden to pay at the year end. But I want to compare the overall which one will I save more? Any expert opinions?

• If you are on someone's payroll--even temporarily--you are a W2. (W2 refers, of course, to the withholding tax form identifying what was withheld from your wages.)
• If you work as an independent contractor and bill clients for the job, you are a 1099. (1099 refers the form a client is obliged to furnish you and the IRS at the end of the year, if you were paid $600 or more.)

- http://www.techwr-l.com/techwhirl/employmentarticles/w2or1099.html

Thanks SSNY for the article. It was in depth theoritically. I am currently in W2, I had option of being 1099. I saw that the total tax taken out including payroll, federal and state came up to 45% almost. I thought my god, what if I worked for 1099 and at the end of the year I file for taxes and how much will I have to pay if I work for 1099 and not pay any taxes right now?

To be more elaborate eg. I get like $100 a year in 1099, but if I am a W2 employee after this tax and that I get like $55 in my hand. so am I better off taking the $100 and pay the taxes later or pay taxes now and get the returns later..

W2 is when you're employed by some company. Thy have to match your FICA, with is 7.65 % for future socisl security benefits.

1099 is an independt rep, there is not FICA withholding.

as far as taxes go, its pretty much the same.

beside the state tax, and medicare..social serucity and fica, may be they are withholding more coz u havent shown dependents.

it really doenst matter much how much u withdraw from your pay checknow....what happens is when you file for your taxes..and depending on the number of dependents and other factors...you get your moeny back if you've paid more.

so now you end up paying, 15 % yourself rather than 7.65. and also companys dont provide beneifts such as health retirementa plans to 1099.

Trust me you are good with W2

With 1099, aka corp-to-corp, you are an independent contractor totally responsible for your taxes. You will make more money, say... $75/hr as 1099 vs. $65/hr as W2, because the company you are dealing with has very little, if anything, to do with you in the compensation/taxation/documentation process.

However, do keep in mind that 1099 requires you to be incorporated. That means you (it can be just you or with other people) have established yourself as a corporate entity. That further means, you have cleared all necessary steps (including being lawful resident- I am not sure if foreigners are eligible, having sufficient (perhaps $1mil worth) insurance, and other legal mumbo-jumbos).

If 1099 is the route you are contemplating, I recommend you read up on it first. One of those Robert Kiyosaki's Rich Dad Poor Dad series books - titled Incorporate Yourself, or something similar - comes to mind.

So, yes, you make more money as W2 than as regular employee. You make even more money as 1099 than as W2.

Hope this helps.

1099 is the way to go.