1099 is indpendent work
EAD holder is eligible for 1099 but consider all the pros/cons before starting work on 1099.
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W2 refers to an employee/employer relationship where the technical services firm hires the contractor. It is important to note that the contractor is an employee of the shop and not the client. Payments made to the contractor are payroll payments and appropriate taxes are paid and accounted for by the employer.
1099 refers to an independant contractor status where the shop is paying the contractor as contract lobor. The contractor does not have to be incorporated or even have a business. 1099 is the IRS form used by a company to report payments made to individuals for various types of income. For instance the form that a person's interest income is reported on is a 1099 Int. form. The 1099 status is often confused with the Corp-to-corp arrangement because payments to a corporation can be reported with the 1099 form. If the proper tax ID information is provided and verified and all accounting is done properly it is not necessary for a company to report payments with a 1099 form. The Ragan tax reform of 1986 greatly reduced the number of independant contractors in 1099 status. Most clients will no longer accept contract labor as a way of doing business but will work with an individual that is incorporated.
Cost of C2C
There are statutory costs related to operating as a corporation instead of a W2. These are the same basic costs that a shop will incur for any employee:
Company share of FICA - 6.2% of first $76,200
Company share of Medicare - 1.45% of all income.
Federal Unemployment Tax - .8% to 6.2% of first $7,000
State Unemployment Tax - Varies per state - 2 to 5.4% on $7,000 to $32,000 of income.
Workmans Comp. - roughly 1% of all income.
Additionally there are overhead expenses that are a function of the total payroll or gross proceeds. Each state has registration fees which require yearly fees to maintain, registered agents must be obtained for each state, bookeeping fees and CPA fees are necessary and insurance requirements add to the cost of doing business.