Specifically, those are the forms used by employers to report payroll to the the Internal Revenue Service.The difference is that a W2 form is used to report the amount paid to an employee of the company. Employees get numerous benefits, but also the employer is required to withhold estimated income taxes. (These can be adjusted by the employee using a W4 form.) Thus, a W2 employee is likely to get paid less because of the other benefits he receives, and less again because the paycheck he receives will already have estimated taxes taken out.A u201c1099u201d worker is not an employee. Rather, they are a contractor. A contractor gets no benefits - no vacation, no sick leave, no holidays, no retirement, no health plan, no saving plan, etc., etc., etc. As a result, a 1099 contractor usually gets much higher pay, since they are typically paid by the hour and only for the hours they actually work. Moreover, the employer does NOT withhold estimated taxes, so the paycheck will appear to be even higher.Another difference is that 1099 workers are required to pay a u201cself-employment taxu201d. This corresponds to the amount that the employer would normally pay in taxes towards an employeeu2019s social security account. Since the 1099 worker is u201cself-employedu201d, he must pay that tax himself. This tax is 6.2% of the pay up to $128,000. As with other taxes, this will not be withheld by the employer, but must be estimated and paid each quarter by the worker or they will be fined for underpayment of estimated taxes.Finally, only employees get u201cUnemployment Insuranceu201d. If an employee loses his job, the state will pay him weekly benefit until he finds a new job - up to 26 weeks, but sometimes longer. 1099 workers get no such benefit.As a result, the 1099 workeru2019s equivalent pay rate should be approximately 33% higher than that of the employee doing the same work. The exact figure depends on the benefits.