The short answer is no. When you pay someone as a 1099 contractor, you don’t withhold any taxes from their payment and you don’t pay any employer-side payroll taxes on that money. You simply pay them the full amount and report it on a 1099-NEC at year end if you pay them $600 or more.

The term “1099 employee” is actually a contradiction. A worker is either an employee who gets a W-2 or a contractor who gets a 1099. They can’t be both. When someone asks about 1099 employees, they usually mean independent contractors who work for them regularly.

For W-2 employees, you pay the employer portion of Social Security and Medicare at 7.65% of wages, federal unemployment tax, and state unemployment insurance. You also withhold the employee’s share of payroll taxes and income taxes from their paycheck. All of this adds up to significant cost and administrative work beyond the base wage. Proper payroll setup handles these obligations correctly from the start.

Contractors handle their own taxes. They pay self-employment tax at 15.3% plus income tax when they file their returns. Your only obligation is to report what you paid them. This is why some businesses prefer using contractors when possible. It’s simpler and cheaper on the surface.

The problem is that classification isn’t your choice. The IRS and state agencies have rules about who qualifies as a contractor versus an employee. It comes down to control. If you control when, where, and how someone does their work, they’re probably an employee regardless of what your contract says. If you’re just hiring someone to deliver a result and they control the process, that’s a contractor.

Misclassification creates real liability. If you’ve been paying someone as a 1099 but the IRS determines they were actually an employee, you owe the employer share of payroll taxes you should have paid, plus potentially the employee share you should have withheld. Add penalties and interest and it gets expensive fast.

If you’re unsure about a worker’s classification, get it right before you start paying them. Working with a startup bookkeeper or accountant to review your worker arrangements can save you from a costly correction later. And if you already have workers you’re not sure about, it’s worth reviewing their status before it becomes a problem.