My husband is a carpenter and recently started working for another company as a contractor. He uses his own tools, decides his hours, and even pays for his own gas. Based on this, he’s always been on a 1099.
The new boss just asked him how many dependents he has, and it seems like they want to make him an employee instead of a contractor.
If he becomes an employee, he won’t be able to claim mileage or tool expenses like before. Why would the boss want this? What’s the benefit for the company? For my husband, it feels like a loss, and he would’ve negotiated a higher rate if he knew it was W2.
We’re trying to understand what’s going on before he talks to his boss.
It’s probably because it’s safer for the company. Employers can’t treat someone as a contractor if they qualify as an employee under the rules, but they can hire someone as an employee even if they might be a contractor.
Your husband should ask directly to confirm. If he does become an employee, he could request mileage reimbursement. That’s even better than the deduction because he gets the full amount tax-free.
@Zen
Exactly. If a company gets audited, they only have to prove the 1099 workers meet all the contractor requirements. W2 employees are no issue for auditors, so this reduces the risk for the company.
@Jo
That makes sense. We don’t over-claim expenses, but we’ve definitely missed some mileage deductions before. It’s starting to look like being W2 might be better.
One advantage of being an employee is that the employer pays half of Social Security. This is based on the gross amount, which can increase future Social Security benefits. But it’s worth noting that some deductions disappear as an employee, like self-employed health insurance or certain credits based on AGI.
@Merritt
So does that mean he’ll get more toward Social Security as an employee? Also, he’ll still have self-employment income from other jobs. Can he still deduct health insurance partially?
Abi said: @Merritt
So does that mean he’ll get more toward Social Security as an employee? Also, he’ll still have self-employment income from other jobs. Can he still deduct health insurance partially?
The total Social Security amount doesn’t change, but the employer pays half as a W2 employee.
Abi said: @Merritt
So does that mean he’ll get more toward Social Security as an employee? Also, he’ll still have self-employment income from other jobs. Can he still deduct health insurance partially?
If he has enough self-employment income, he can still take the deduction for self-employed health insurance. He just needs to prorate tools or equipment expenses between the W2 job and self-employment use.
This is kind of odd since most companies prefer 1099s to avoid extra costs. Maybe the boss wants more control over your husband’s schedule or thinks it’s cheaper to hire him as an employee.
Ren said:
This is kind of odd since most companies prefer 1099s to avoid extra costs. Maybe the boss wants more control over your husband’s schedule or thinks it’s cheaper to hire him as an employee.
It’s weird because my husband already said he’ll work when he wants. He has other clients and won’t be tied to one company. Plus, he drives 80 miles round trip for most jobs, so I doubt they’ll cover that.
Your husband should talk to the boss to confirm if he’s an employee or contractor. Then decide if the rate still makes sense given the loss of deductions.
Dell said:
Your husband should talk to the boss to confirm if he’s an employee or contractor. Then decide if the rate still makes sense given the loss of deductions.
Agreed. He mostly deducts mileage and some supplies, but maybe it evens out with the employer covering Social Security.