This gives 1099 consultants instant access to all their earnings for the purposes of investing or spending. This, of course, does not mean that they do not incur the same tax liability that their W-2 counterparts do. In fact, a disadvantage of this payment method is the increased work and burden placed upon the individual to track, withhold and pay all of his or her applicable taxes. Federal income tax, social security tax, federal unemployment insurance tax, plus state and local tax liabilities where applicable all have to be tracked and paid by the consultant. The failure to responsibly save earnings to pay these taxes can leave consultants in a financial crisis when tax day nears.
Consultants are highly in demand during times of economic expansion.
Consultants are often needed to work in areas where growth is occurring and where existing talent is short. When the economy slows, however, or even when an individual company's performance slows, consultants may be the first employees to feel the pinch. Historically, during these times, troubled companies retrench and focus on their more basic needs. Permanent employees' futures may be more secure in these instances. Consultants have the opportunity to work with many different types of organizations in many different capacities.