Should I switch from 1099-NEC to W-2 for how I get paid by my employer?

I've been receiving a 1099-NEC from my employer for the past few years, and I've always just paid my taxes once a year without much stress about it. I set aside roughly 30% of each payment and that's worked fine for me. This year I finally decided to talk to an actual tax professional instead of doing everything myself, and he seemed shocked by my situation. He told me I'm being way too cautious with my tax withholding and that I'd be much better off having my employer switch me to W-2 status. He mentioned something about self-employment taxes and how I'm basically paying double what I would as a W-2 employee. Is this actually true? I've always just assumed the 1099 arrangement was better since I can deduct business expenses, but now I'm wondering if I've been costing myself money all these years. Does it make financial sense to ask my employer to switch me to W-2? Or should I stick with the 1099-NEC arrangement I've got going? What are the real pros and cons here?

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18 comments

Dana Doyle

•8M

You're actually likely leaving money on the table with your current 1099-NEC situation. As a 1099 contractor, you're responsible for both the employer and employee portions of FICA taxes (Social Security and Medicare), which is about 15.3% total. W-2 employees only pay half of that, with the employer covering the other half. Being a W-2 employee also gives you access to employer-sponsored benefits like health insurance, retirement plans, and paid time off. Plus, your employer would handle tax withholding for you, which means no more setting aside that 30% or making quarterly estimated tax payments. That said, 1099 work does have some advantages. You can deduct legitimate business expenses on Schedule C, potentially reducing your taxable income. You also might have more flexibility and independence with your work arrangements.

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Dana Doyle

•8M

Yes, if you switch to W-2, you would lose the ability to deduct those business expenses directly on a Schedule C. As a W-2 employee, those types of deductions are largely unavailable since the Tax Cuts and Jobs Act eliminated most miscellaneous itemized deductions. You're right that many employers do pay contractors a higher rate to offset the additional tax burden and lack of benefits. Typically, contractors might receive anywhere from 15-30% more in gross pay compared to equivalent W-2 positions. This is something the poster should definitely consider when making their decision - if their rate would decrease with a status change, they'll need to calculate whether the tax savings and benefits outweigh the potential reduction in gross income.

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Manny Lark

•8M

I was in a similar situation last year where I had been getting 1099-NEC for years without realizing what it was costing me. I was honestly shocked when I discovered taxr.ai (https://taxr.ai) and uploaded my documents. The analysis showed I was overpaying by about $4,300 annually by staying on 1099 status. Their system compared my current 1099 situation against what I'd pay as a W-2 employee with the same income. It was eye-opening to see the difference in FICA taxes and how my business deductions weren't actually saving me as much as I thought compared to the extra self-employment taxes.

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Manny Lark

•8M

The analysis is actually pretty comprehensive. It takes your full tax situation including your income, current deductions, and other factors, then creates a side-by-side comparison showing what your tax burden would be under different scenarios. It even suggested specific things I could negotiate with my employer to make the transition beneficial for both of us. No catch that I found. They have free and paid tiers depending on how much help you need. The basic document analysis gave me enough information to make my decision, and that was available with their free account. I ended up upgrading later when I needed help with some more complicated tax planning issues.

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Rita Jacobs

•8M

Just wanted to update after trying taxr.ai based on the recommendation. I uploaded my last two years of 1099-NECs and some expense records, and wow - I'm literally paying about $3,800 more in taxes each year than I would as a W-2 employee making the same amount. The report broke down exactly how much I'm losing to self-employment taxes vs what deductions I'm benefiting from. I'm meeting with my employer next week to discuss transitioning to W-2 status. The site even generated a comparison sheet I can take to the meeting to help explain why this would be better for me without costing them much more. Definitely recommend checking it out if you're in this situation!

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Ben Cooper

•8M

If you decide to stay as a 1099 contractor, make sure you're at least getting paid enough extra to offset the additional tax burden! And don't forget about quarterly estimated tax payments to avoid penalties. On a side note, when I needed to sort out some tax issues with the IRS last year, I spent DAYS trying to get through on their phone lines. Finally used Claimyr (https://claimyr.com) and got connected to an actual IRS agent in under 45 minutes. They have a demo video at https://youtu.be/_kiP6q8DX5c showing how it works. Saved me from complete insanity after my 12th attempt to call them directly.

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Ben Cooper

•8M

They use a technology that continuously redials and navigates the IRS phone system for you. Once they secure a place in the queue, they call you and connect you directly to the agent. It's all above-board - you're still going through the normal IRS channels, they just handle the frustrating waiting and redialing part. It's definitely legitimate. The IRS knows these services exist but they don't have a problem with them since they're just helping connect taxpayers with agents through the regular channels. I was skeptical too until I tried it and got through to resolve my issue in one day instead of weeks of trying.

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Cynthia Love

•8M

I need to eat my words. After seeing the replies, I tried Claimyr yesterday because I've been trying to reach the IRS about a missing refund for THREE WEEKS with no luck. I was 100% sure it wouldn't work, but I was desperate. Got a call back in about 35 minutes and was connected directly to an IRS rep who actually helped solve my issue. I had filed both as a W-2 employee and with 1099-NEC income, and there was a processing delay because of some document matching issue. The agent was able to verify my information and confirm my refund would be processed. So yeah, I was wrong. That service actually works, and now I feel silly for spending so many hours listening to the IRS hold music for nothing.

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Darren Brooks

•8M

It can definitely be a delicate conversation. I recommend approaching it from an educational perspective rather than an accusatory one. Share what you've learned about the differences and express your concerns about proper classification. If you're worried about potential backlash, gather information about your specific situation first. The IRS has Form SS-8 that you can file to request a determination of worker status, and they'll evaluate whether you should be classified as an employee or contractor. This gives you official backing if you need to address it with your employer.

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