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All you want to know about being a 1099 employee 

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1099 employees is a term that you often hear when we talk about the present work landscape. However, many people are unable to figure out what the concept of a 1099 employee is. In simple terms, when we speak, being a 1099 employee refers to freelancers, independent workers, sole proprietors, and self-employed individuals. 

All you want to know about being a 1099 employee 

Usually, these are people who manage a small business, but that does not always have to be the case. They can work with different clients and get paid for the work without any tax deductions. The name is derived from the 1099 tax form that such individuals are supposed to fill. Here we tell you more about 1099 employees and how they operate.

Table of Contents

Understanding the 1099 employee

What does 1099 employee mean

The 1099 employee is independent in his working. They have a level of autonomy over how they work, and their clients cannot control them. A 1099 employee cannot demand any of the regular benefits like office space, paid vacation time, medical insurance, etc. They have to cater to all the expenses they incur while working in this form. In fact, they are not protected by the Department of labor against issues like discrimination, minimum wages, and other problems.

Types of 1099 employees 

As such, there is no fixed definition of what is a 1099 employee. However, there are certain jobs and responsibilities that these employees give a preference to. Small business owners get hired to complete project-based work where limited resources are required. 

Content writers, web designers, social media strategists, and CPAs are some of the jobs that companies prefer assigning from outside. Apart from these some other jobs that have recently come up are photographer, painter, caterer, baker and cleaning services.

This also depends on the type of job you are handling. If you are a freelancer, you will be asked to handle the back-end jobs, not the core responsibilities. For example, if you set up a coffee shop, then the chef and waiters will be your regular employees. However, if you wish to change the décor of your restaurant or redesign the menu, you will need the help of a 1099 employee.

Is a 1099 employee considered self-employed 

In most cases, we consider a 1099 employee as being self-employed though the definition says otherwise. As per the IRS, an independent contractor is definitely self-employed. He is different from a regular employee as he himself controls the work process. The payer can only control the outcome. According to the IRS, this includes web designers, doctors, and lawyers as well. However, you must remember that not all are independent contractors. Some of them can be merchants and provide goods instead of the service.

Difference between a 1099 employee and a subcontractor

Many companies hire an independent contractor for jobs they wish to get accomplished but cannot assign to their own team of employees. However, often it happens that the work is too big for one person to handle. At that time, you need a subcontractor to manage the balance. A subcontractor is a person who the general contractor assigns a part of the work. 

It purely depends on the contract signed between the company and principal contractor; the main contractor hires sub-contractors. In some cases, subcontractors are entitled to have workers comp insurance. You can request the subcontractors to give you the certificate of insurance so that they won’t hold you responsible for any problems in the future.

Benefits of hiring a 1099 employee 

Hiring a 1099 employee just like any other has its share of benefits. Read on to know how hiring one helps the companies.

Money-saving

When you hire a full-time employee, it comes with a higher cost. Apart from paying their salaries, there is an additional cost of compensation insurance, office supplies, and many other overheads. However, this is not the case with a 1099 employee. All you need to make payments to them is a pay stub generator. 

Apart from that, there is no other significant investment that you need to make for the 1099 employees. This, in turn, is one primary reason why people hire them in the first place.

Flexibility 

Do you need an employee only for a fixed time? In that case, it is always better to hire a 1099 employee to help you out. By doing that, you have the convenience and flexibility of asking the employee to leave whenever your job is over. Since the employee also has an idea of the status of the project, he will not complain in any form. On the other hand, you have to be very careful with the regular employees as you cannot just fire them even if they are underperforming. Unless the full-time employee does something that is grievously wrong, there is no chance that you could ask him to go.

Reduces the legal risk

In normal circumstances, the company has to arrange insurance for all of its full-time employees. But if they have 1099 employees on the payroll, they are not entitled to any such benefits. This means that he is less of a legal risk as he cannot object to the benefits meted out to him. Your company remains saved from any legal battles as the employee has no rights to the benefits that the company offers to its regular workers.

Provides specialized services 

A 1099 employee is usually hired only when the company wants a person to tackle any specialized task. You will bring him on a project like preparing a marketing campaign or creating content for a website, a job that your employees cannot tackle at that time. 

Otherwise, this person may not be suitable for a full-time job at your office. But he handles one specific job with ease, and his skill set can help your company finish a task that none of your other teammates can do so.

Simple hiring process 

The hiring process of a 1099 employee is not as elaborate as a regular full-time employee. You just have to advertise the job opportunity, and you are bombarded with ideal candidates. A little scrutiny and one level of the interview are sufficient to get the employee on board. 

However, with a regular employee, you have to consider an entire hiring process involving various stages of interviews. The recruitment starts with advertising the job on various job boards. Post that, the Human resources department comes into the picture. It is their job to find out the ideal candidates and conduct detailed interviews until the final one is selected. This requires more effort in terms of time and financial investment.

No expectations of a hike

A 1099 contract employee has no right over the benefits the company provides to its regular employees. They cannot ask or request a pay hike at any point. It is purely the jurisdiction and decision of the company whether they want to offer any kind of hike to them. However, they are not bound to do so, which provides a level of freedom to the company. They only have to deal with the pay hikes of their regular employees even though they are getting work done by other individuals as well.

Benefits of being a 1099 employee 

Naturally, the 1099 professional employee finds this kind of work practice lucrative than others. It is the feeling of independence that provokes many people to understand how to be a 1099 employee. Let us read more benefits of being a 1099 worker.

Independence 

Working for yourself means you have a certain level of independence that a regular job does not give. You can work on your job for as many hours as you want and choose your timings as well. In fact, there are no geographical boundaries to your job as you can work for anyone. You are your own boss, and no one declares your terms of working.

However, this also implies that you have to work very hard and be self-disciplined. You have to set a fixed time schedule and ensure that you adhere to these timings, which require dedication

Work-life balance

Those days are gone when workers had to slog for long hours to meet the deadlines. Now they can manage their work as per their time availability. This means you can use your time efficiently and for your self-being. Spend time with family or go on a vacation; you can do all that without feeling guilty about it. The work-life balance is essential for the overall physical and mental wellbeing of a person and is not easy to attain otherwise.

No limits to career growth

You are no longer limited in how far you wish to go in attaining success. It is purely your choice at what level you will feel that you have acquired enough success. Maybe you want to attend classes and specialize in a new skill. Or you want to take up more responsibilities and assignments and become more proficient. All this you can do easily if there is no one to dictate your choices and style of working.

Control over your taxes 

You can get greater control over your tax situation by being a 1099 worker. Independent contractors are not subjected to the withholding of state, local or federal taxes by the employer, so there are no deductions from the paycheck. This helps you in meeting all your short-term obligations and improves the cash flow situation. The IRS expects you should make quarterly tax payments unless you are eligible to apply for certain tax exemptions.

Cons of being a 1099 employee

Everything is not rosy for a 1099 employee. There are some problems they also face in their line of work. Let us have a look at them.

Irregular income 

One of the biggest problems with regards to being a self-employed professional is that the earning is quite irregular. In certain months the person earns a significant amount, while in some months, there is no work at all. This not only causes stress to the person but makes it difficult for him to tackle the regular bills he has to pay every month. Inability to manage your bills can cause a dent in your credit score, which is not a very good prospect.

No major employee benefits 

A regular employee gets a lot of benefits from the company he is working with. To retain their employee’s company provides them loads of perks like vacations, insurance, child care facilities, etc. This means that a 1099 employee may be able to make lots of money, yet he does not get access to any of the above benefits. The absence of these benefits adds an additional burden on your pocket.

Lack of job security 

Just like fluctuations in income, there is also a lack of job security as your project can end at any time. If you are in between jobs, you will find it hard to look for a new and lucrative opportunity. Also, the company can ask you to leave the existing project without any prior intimation. You have no option but to agree and wait for the next job that comes your way. 

Factors that determine the status of a 1099 employee

For the sake of tax, you have to determine the status of each individual who is working for you. It is the company’s legal responsibility to find if the employee is filing his taxes on time or not. You must consider the following factors that will help find the status of any employee.

Methods of working

It totally depends on the style of working of the individual in question. If he has an independent style of working and does not need any inputs or guidance from you, then he is a 1099 employee. His knowledge, methodology, tools, ideas, problem-solving ideas should all be his and not governed by your interference. You can consider them independent and capable of doing all their tasks by themselves.

Degree of control

Do you have control over their schedule? As in, do you decide when they will take leaves, their working hours, and office space? If you want to assert a high level of control over them, you will have to treat them as full-time employees. Independent contractors should have autonomy, and if they don’t have it, you cannot consider them as a 1099 employee.

Length of your association

Another major factor to consider is the longevity of your relationship with them. For example, if you have hired a person to design your website, giving him three months to do so, then he will be a 1099 employee. However, if the person working for you is answerable to you and his job is for a longer duration, then he will not fall in the same category. You will have to consider him as a full-time employee of your company. 

Difference between a 1099 employee and a W2 employee

Both 1099 employees and W2 employees are named so based on the tax forms they have to fill. Business owners have to fill the Form 1099 NEC for their independent contractors. However, if they are dealing with a full-time employee, they are supposed to fill the W2 form for each of their employees. 

W2 employees are your standard full-time workers, and the business maintains direct control over them. They also are protected under the laws set by the Department of Labour. Employers have to provide the W2 employees with all perks like schedules, benefits, employment packages, etc.

What is misclassification?

To avoid the burden of extra taxes, some employers show some of their employees as independent contractors.  Since the definition of a 1099 employee is quite confusing, and IRS only gives guidelines, they get away with this false representation.

The burden of this proof lies on the employer himself. In order to avoid any kind of fees or punishments bestowed, the company should assume that their worker is a regular employee unless it is explicitly specified. Misclassification is quite common and expensive, and it is advisable not to fall into the trap. 

In reality, you should always file the taxes of your hire as a regular employee. If there is an issue, later on, you can ask for a tax return. Another thing that you could do is to file a Form SS-8 with the IRS to let them decide what the exact classification is.

Paperwork and tax forms required 

Though most 1099 employees associate with a company for a limited period of time, they should still sign a written agreement with the client. The contract must assert clearly all the terms of work, ways, and methods of payments and penalties and expectations.

Apart from that, the employee has to provide the company with information about their business along with the W9 form. Post that, they have to submit the 1099-NEC to the IRS.

When we talk about the tax filing for 1099 employees, the process is quite simple. First, ask the contractor to give the W9 form. The form contains a lot of important information, including the tax identification number.

This number is needed to fulfill the 1099-NEC form. However, if your independent worker is based out of the US, they will have to fill the Form W-88EN and Form W-88EN E instead of form W9.

An important thing here that we need to talk about is that 1099 employees have to fill their own taxes. Since employers are not paying FICA tax for them, they have to pay the employment tax. This tax covers their contribution to social security and Medicare taxes. These contractors also have to pay an income tax.

Write off the taxes 

If you are working as an independent contractor, you are entitled to tax deductibles. There are many business-related expenses that you could write off. IRS understands that there are many costs that every business has to handle. This includes office, advertising, travel expenses, commissions, and professional services. By filing these tax deductions, you can avail of a lot of money-saving.

Conclusion

A 1099 employee gets a lot of flexibility in terms of the manner in which he can conduct his work. Apart from that, he is free to file his taxes and claim exemptions. This autonomous feeling is making more and more people to become 1099 employees. As the time proceeds, the trend of these flexible working will increase further.

With this will come the chance to have a career of your own choice and select your clients accordingly. This possibility is quite lucrative for people who don’t want to be saddled with any additional work responsibilities and long work hours. However, some jobs can be tackled only by full-time employees, and the 1099 employees are preferred only for certain specific tasks. 

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.techpluto.com/1099-employee/

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Report: Seattle digital remittance startup Remitly hires banks for IPO at around $5B valuation

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(Remitly Photo)

The news: Seattle startup Remitly has hired investment banks to prepare for an initial public offering, according to Reuters. The IPO would value Remitly at around $5 billion, Reuters reported — a sizable spike from its last valuation of $1.5 billion in July. Remitly declined to comment when contacted by GeekWire.

Remitly background: Founded in 2011, Remitly’s mobile technology lets people send and receive money across borders, including immigrants in the U.S. and U.K. who support families back home in countries such as the Philippines, India, El Salvador, and others. The service eliminates forms, codes, agents, and other fees typically associated with the international money transfer process dominated by Western Union, MoneyGram, and other longstanding providers.

Last funding: Remitly raised $85 million in July at a $1.5 billion valuation. Total funding to date, which includes a $220 million cash infusion from July 2019, is nearly $400 million.

Remitly, ranked No. 3 on the GeekWire 200 list of top Pacific Northwest tech startups, has around 1,000 employees across its Seattle HQ and six other offices in Spokane, Wash., London, Cork, Krakow, Manila, and Managua.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.geekwire.com/2021/report-seattle-digital-remittance-startup-remitly-hires-banks-ipo-around-5b-valuation/

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To buy time for a failing startup, recreate the engineering process

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In non-aerobatic fixed-wing aviation, spins are an emergency. If you don’t have spin recovery training, you can easily make things worse, dramatically increasing your chances of crashing. Despite the life-and-death consequences, licensed amateur pilots in the United States are not required to train for this. Uncontrolled spins don’t happen often enough to warrant the training.

Startups can enter the equivalent of a spin as well. My startup, Kolide, entered a dangerous spin in early 2018, only a year after our Series A fundraise. We had little traction and we were quickly burning through our sizable cash reserves. We were spinning out of control, certain to hit the ground in no time.

Kolide had a lot going for it that enabled me to recover the company, but by far the most important was that we recognized we were in a spin very early, and we had enough cash remaining (and therefore sufficient time) to execute a recovery plan.

All spins start with a stall — a reduction in lift when either the aircraft is flying too slowly or the nose is pointed too high. In Kolide’s case, we were doing both.

First, we raised too much money too fast. In order to justify the post-money valuation that came with the raise, we set unattainable goals. To make matters worse, we lacked the confidence in our product and strategy, so we developed our solution with hesitancy, underspending in critical areas. As a result, we were flying too steep and too slow. We stalled.

If a stall isn’t corrected promptly, a spin can develop. Flat spins are one of the worst. Once the flat spin starts, there are a number of techniques experienced pilots should perform to recover the aircraft. Nearly all of these techniques require a critical resource, altitude — or, put another way, time.

Just like amateur pilots, startup CEOs don’t receive spin recovery training. When Kolide was spinning out of control, the vast majority of the advice I received was to cut our losses and sell the company or return the money to the investors.

At the time, I didn’t find any promising examples of companies with these same problems successfully recovering; I found only smoldering wreckage. By February 2019, my co-founders departed.

Despite this tell-tale sign of imminent demise, I was ultimately able to recover and put us on track for a great fundraise. Here’s how I recreated the engineering process.

Buying time

Kolide had a lot going for it that enabled me to recover the company, but by far the most important was that we recognized we were in a spin very early, and we had enough cash remaining (and therefore sufficient time) to execute a recovery plan. Even waiting just a few more months would have likely changed the outcome.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://techcrunch.com/2021/05/07/to-buy-time-for-a-failing-startup-recreate-the-engineering-process/

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Weekly VC Overview: All 80+ European startup funding rounds we tracked this week (3-7 May 2021)

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This article is visible for CLUB members only. If you are already a member, but you don’t see the content of this article, please log in here. If you’re not a CLUB member yet, but you’d like to read members-only content like this one, have unrestricted access to the site and benefit from many additional perks, you can sign up here.

Previous articleBerlin-based beauty platform Glambook raises €500K to enter UK market 

Anto has a creative and strategic background in Film, Marketing and Communications. With a multicultural perspective from living in different places such as Colombia, Costa Rica, Germany and London, she’s now based in the tech hub that is Barcelona. Passionate about the whys and hows, digital transformation and all that creates a meaningful impact.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.eu-startups.com/2021/05/weekly-vc-overview-all-80-european-startup-funding-rounds-we-tracked-this-week-3-7-may-2021/

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GeekWire 200 update: GeekWire Awards finalists climb the rankings as others ‘exit’

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The GeekWire Awards are fast approaching on May 20, but the spirit of our annual startup and technology celebration extends beyond a single ceremony.

It is a true community effort. This year, GeekWire received nearly 200 community nominations and looked at each category anew through the lens of an ongoing pandemic. The nomination, selection and voting process spans more than two months.

Over a two week period in April, readers cast more than 6,000 votes across 12 categories. These community votes will be factored in with feedback from this year’s judging panel composed of 21 tech and business leaders.

Voting is now closed but no matter who takes home a robot trophy on May 20, the finalists in each of these categories are making waves in the region’s tech ecosystem. They have been nominated by their peers and recognized for their innovative work.

Finalists on the rise

Below are where some of these finalists rank and how far they’ve moved up on the GeekWire 200, our ranking of privately-held tech companies based in the Pacific Northwest. See all the finalists and categories here.

Making their exits

Companies that go public or get acquired “graduate” from the GeekWire 200 — that includes all finalists in this year’s Deal of the Year: IPOs/Acquisitions category. Here is where each company ranked prior to their exits:

  • Athira Pharma (not ranked)
  • Auth0 (No. 4 in March 2021)
  • Accolade (No. 7 in June 2020)
  • Rover (No. 7 in March 2021)
  • Sana Biotechnology (No. 100 in January 2021)

A number of GeekWire Awards finalists are not currently ranked on the GeekWire 200 — not yet, at least. Be sure to check the list for future updates as these companies make their GeekWire 200 debut.

The GeekWire 200 is derived from our broader list of more than 1,600 startups headquartered in Washington, Oregon, Idaho or British Columbia.

Register for free to watch the winners announced live at this year’s virtual GeekWire Awards on May 20.

About the latest GeekWire 200

You may have noticed a lot of movement in the latest GeekWire 200 rankings. In addition to a number of high ranking companies “graduating” from the list, we recently completed a thorough audit of the top 200 companies. This is an ongoing project to update and improve our Startup List and community resources. Questions? Contact Editorial Operations Director Cara Kuhlman at cara@geekwire.com.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.geekwire.com/2021/geekwire-200-update-geekwire-awards-finalists-climb-rankings-others-graduate/

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