A 1099 employee is an independent contractor. The name derives from the Internal Revenue Service's (IRS) Form 1099 that contract workers must complete to report their earnings.

Freelancers, consultants, self-employed workers, and sole proprietors are common types of 1099 employees. This includes gig workers, such as Uber or Lyft drivers and Airbnb hosts.

In most cases, an independent contractor is a temporary worker who organizations pay to complete specific duties or tasks. These projects can sometimes be long-term, but the understanding is that the organization will no longer employ the contractor at the end of the project. 

Contractors generally work under a written contract with an organization that outlines what is expected of each party. While these contracts are sometimes exclusive, many contractors work for multiple clients and projects at a time.

What is the difference between a W-2 and a 1099 employee?

There are two primary types of workers: W-2 employees and 1099 employees. A common question from business owners and HR professionals is regarding the difference between W-2 employees and 1099 employees. Let’s break down the differences. 

W-2 employees are workers directly employed by your organization. These workers, also known as regular employees, are guaranteed to earn at least the minimum wage, and many state and federal laws apply to benefits and overtime hours. Employers also withhold Social Security, Medicare, federal income, and FUTA taxes for these employees. 

Most employers are expected to provide their W-2 employees with the necessary tools and supplies for them to do their jobs. They are also eligible for employee benefits and other perks.

In contrast, contractors work for themselves. They are responsible for providing their own tools and equipment, setting their schedules, and paying their income taxes and other applicable forms of self-employment tax.