1099 vs. W-2 Truck Drivers: What's the Difference?
Updated: Jan 12
There are many differences between W-2 and 1099 truck drivers. In this article, we'll talk about the main differences between the two, specifically how they file and pay their taxes.
The most significant difference between W-2 and 1099 drivers, is that a W-2 worker is classified as an employee and has taxes withheld from their paycheck prior to the employee receiving their pay. The employer of the W-2 employee is responsible for remitting the various taxes withheld to the appropriate governmental agencies.
A 1099 worker is classified as a contractor, and a 1099 worker does not have taxes withheld from their paycheck. A 1099 contractor would receive the full gross amount as pay. The company who has hired the 1099 worker has no responsibility to remit taxes. The tax remittance or payment of tax is the full responsibility of the individual 1099 worker.
The Form W-2 is what a company issues to an employee at the end of the year and the Form 1099 is what a company issues to a contractor at the end of the year. Both of these forms indicate the amount of money earned by the worker within the given year but the W-2 will include information about how much in taxes was withheld while the 1099 reports only earnings.
Let’s dive into some of the tax differences between these two types of workers based on the tax form they receive.
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In the world of trucking, company drivers are considered W-2 employees. They are the typical, hourly or salaried workers that are hired to perform a specific role. In terms of truck driving, they are given a schedule, a consistent paycheck, benefits provided by the company, a company truck, etc.
Every tax season, employers provide a Form W-2 to the IRS and the employee. On the Form W-2, the employer will report the annual compensation paid to their employee and the taxes withheld from that compensation for federal income taxes, state income tax (if applicable), and taxes remitted for Social Security and Medicare.
When it comes to paying taxes as a W-2 employee, the employer has already withheld federal and state income tax, Social Security tax, and Medicare tax from employees when they pay them. All of these amounts are included on the W-2 form that is received from the employer which is then used to file taxes. Employers must mail Form W-2 to their employees by January 31st of each calendar year.
Filing taxes as a W-2 employee is much simpler compared to filing taxes as a 1099 worker. The filing of an income tax return is the process in which a taxpayer would determine if they had their employer withhold too much tax throughout the year. In the event that tax was over withheld a tax refund would be issued to the W2 employee by the IRS and state (if applicable). If the employee did not have their employer withhold enough in taxes, then the employee would be required to pay the IRS the amount of taxes that are still due.
In terms of deductions, specifically for truck drivers, W-2 company drivers can no longer deduct the Per Diem deduction. Additionally, a majority of W-2 drivers end up taking the Standard Deduction unless they have a lot of medical expenses or if they dealt with a significant loss due to a natural disaster. The Standard Deduction is an IRS-allowed deduction for each taxpayer and/or spouse used to reduce taxable income. There is nothing that a taxpayer must do to receive the Standard Deduction; it is an automatic allowance to each taxpayer when filing their tax return.
1099 workers may not have a single employer and could have been contracted on with multiple customers that they worked for throughout the year. This is because they own their business and contract their services. They’re also responsible for reporting their income to the IRS themselves, paying Self-Employment Taxes (which cover Social Security and Medicare), and paying income taxes. The companies that hire 1099 contractors DO NOT pay or remit taxes on behalf of that 1099 contractor.