1099 vs. W-2 (Company Driver)

Because with a W2 your responsable for a LOT more, with 1099 you can pass a HUGE chunk of costs and risks off onto the driver. You CAN make 1099 work but 1099 can and has destroyed many drivers.

 

I wouldn’t do it. I even paid w2 when I had drivers, I now am only one working and guess what, still w2, paying myself and paying taxes so I do not have to pay Uncle Sam in lump sum at end of year.

 

Short answer: Tax fraud.

 

Correct. The vast majority of 1099 company drivers are misclassified. I won't say 100%, because I'm not an accountant but it's pretty close.

 

If you work 1099, YOU have to submit all Income taxes, SSA/Medicare at the 12.6% rate and in most states pay the Workmans Comp tax.
The company gets to write you off their taxes as a business deduction.
If your 1099, you better be getting somewhere north of 90 cents a mile to balance that out.

 

If you are new to trucking the last place you should work is for a 1099. Typically what happens is the newbie gets through about a year of work and then gets a letter from the IRS asking about your unpaid taxes. Then you have 30-90 days to pay the lump sum amount for the unpaid taxes, fees, fines, penalty or you are in trouble. But since you were spending your whole paycheck, like everyone does as a W-2 employee you have nothing to pay the IRS. So you are in trouble, and will remain in trouble until you pay that full amount.

If you work 1099 you need to save 25-30% of your weekly/monthly "paycheck" in a savings account. When you get the IRS letter you pay them from that savings account. If you are used to being a W-2 employee then you understand that your paycheck has taxes deducted before it comes to you. With 1099, you get the whole paycheck, no taxes have been paid, but you owe them. On April 15 when you file your taxes you learn how many thousands of dollars you owe the govt. SURPRISE!

 

If you want to do it right you have to pay quarterly estimated taxes or else pay penalties at the end of the year.

 

If you have a good record, steer clear from the 1099 companies. They're good in the sense of giving you an opportunity to earn some money, and keeping your experience up to date, but if your record is good, its too many decent companies to go in that direction. Also, more often than not, the equipment isn't up to date, and the money isn't quite as good as one thinks. It can be risky to work for one of those companies.