Starting a new job—or picking up freelance work—often comes with an important question: will you be paid as an employee (W-2) or as an independent contractor (1099)? In this session, tax professional Nathan Gauger breaks down what those labels mean, why the difference matters, and how to think through your responsibilities before you accept work.
Moderated by Orange Technical College Accounting Operations students, the conversation gives a practical overview of worker classification, how taxes are handled in each situation, and what to watch for so you can avoid surprises at tax time.
W-2 vs. 1099: What’s the Real Difference?
The most common distinction is how the work relationship is structured. Employees are typically hired into roles with ongoing expectations and are paid through payroll. Independent contractors are generally paid for services they provide and may work with multiple clients. In the video, Gauger explains the practical implications of each classification—especially how pay, tax withholding, and financial planning can differ.
A key takeaway: your classification affects more than just which form you receive. It can influence your budgeting, the records you keep, and how you plan for expenses throughout the year.
How Taxes Work in Each Scenario
In an employee role, taxes are typically withheld from each paycheck through payroll, which can make budgeting more predictable. Contractors, on the other hand, are often responsible for setting aside money for taxes and staying organized with income and expenses. Gauger explains how to think about estimated payments and why proactive planning matters—especially for anyone earning income outside a traditional payroll setup.
The session also touches on common compliance questions and IRS focus areas, reinforcing the value of being clear about your work status and keeping documentation that supports how you operate.
Business Structure Basics
For students and professionals considering freelance work or self-employment, the presentation also provides a high-level overview of business structures and why they matter. Gauger discusses how different setups can affect taxes and liability, and why it’s important to choose a structure that fits your situation instead of defaulting to what sounds familiar.
While the details vary from person to person, the overall message is consistent: understand your responsibilities, keep good records, and make decisions that support your long-term goals.
Planning Ahead Pays Off
Whether you expect to start as an employee, take on contract work, or do both over time, knowing the basics of W-2 and 1099 classification can help you make more informed choices as you enter the workforce. This video is a helpful starting point for understanding how employment status connects to taxes, budgeting, and career planning.