Shoudl I accept a w-4 rather than 1099?

[StashingAway]

Hey MMM, I have a weird question;

I currently have a full time job, full salary employee, benefits etc. I have agreed to do some side work for another company (who we lease office space from, so I have to keep somewhat cordial relations with). I have done typical 1099 work in the past and it is what I'm familiar with as far as contracts.

This new company for whatever reason want me as a w-4 employee on the books. I suspect it's something to do with stimulus packages or whatnot with the current economic situation. I am hesitant just because I don't think what I will be doing should entail being on that type of payroll package. I'll honestly probably do like 100 hours of work for them this year. Why would they want me as a w-4? Seems like more

Is there any down sided to just going with the flow and filling out the huge pile of paperwork? It's a weird thing to being cautious about when so many others are losing their jobs, so I don't want to burn any bridges...

[MDM]

The law says that, given the specifics of your situation, you are either an employee or a contractor - not that you get to choose.

See What’s the Difference Between an Independent Contractor and an Employee? for more.

As an employee you pay only the employee portion of FICA tax.  As a contractor you have to pay both the employee and employer portions.

[terran]

All other things (especially pay rate) being equal, you'll end up with more money your pocket as an employee than as a contractor.

[StashingAway]

The law says that, given the specifics of your situation, you are either an employee or a contractor - not that you get to choose.

It's weird that they would want to consider me an employee when I'm definitely playing a contractor role. It doesn't help that I want to be somewhat cordial with them, otherwise I'd just say I'm 1099, deal with it (also weird to do because most of the time people are trying to do the opposite)

[LightStache]

All other things (especially pay rate) being equal, you'll end up with more money your pocket as an employee than as a contractor.

This is true, but normally contractor hourly rate is substantially higher than employee rate.

OP, first off, it's "W-2" not "W-4." That's important because you want to have credibility in communications with your client.

If you don't need this work, just tell them that you're only willing to work as an independent contractor, not an employee, and you think that's the appropriate classification for the type of work you'll be doing. The client has a preference and you have a different preference -- it's not rude to politely decline. If it was an "unpaid internship," would you take it? If you had to drive 100 miles to get to the job site would you take it? Same thing for classification -- you don't have to say yes to terms that don't work for you.

[jesa]

Nothing wrong with stating W-4. You fill out a W-4 when receiving employment. This form tells an employer how much taxes to withhold and is supplied by the employer. In turn, the employer sends you a W-2 for an entire years worth of withholdings.

[terran]

Agreed, although to be entirely accurate it would be W4 vs W9 (the forms you fill out to provide the information need to file tax forms) and W2 vs 1099 (the tax forms themselves).

[travel2020]

My guess is they want to include any payment to you in their PPP loan payroll forgiveness. From what I understand, only W-2 employee pay counts as payroll, not contractor pay. If they have lost employees, this would allow them to legitimately show higher payroll costs.

Key difference between W-2 and 1099 from my perspective is that as 1099, you are responsible for paying all taxes and can deduct various business expenses. Can’t really think of specific downsides to being on W-2 other than the expense deduction aspects. I’ve heard that IRS doesn’t like people switching back and forth from 1099 to W-2 and back to 1099 etc. with the same company so that may be another drawback in the future if this is just for the PPP situation this year.

[blackletterlaw]

I will re-echo what everyone else here said.

+

Your regular employer may have rules on whether you may be considered an employee of another company, at the same time, that you are on their books.

If it doesn't effect them, they probably won't care. But you should try to figure out that you are in the clear if anything happens.

[StashingAway]

My guess is they want to include any payment to you in their PPP loan payroll forgiveness. From what I understand, only W-2 employee pay counts as payroll, not contractor pay. If they have lost employees, this would allow them to legitimately show higher payroll costs.

I'm almost certain that's the reason.

My current employer doesn't care, but I requested 1099 status and didn't fill out the W-2 paperwork. The decision basically boiled down to not wanting to mess with their whole employee packet's worth paperwork! The difference in yearly $ wasn't enough to make me care.

Thanks for the replies everyone!