When an Employer hires a worker, they have to fall into the Employee or Contractor category typically.
The employer must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee .
Employer’s don’t usually have to withhold or pay taxes on payments to an independent contractor
Simply put, 1099 and W-2s are two separate tax forms for two different types of workers to report the income.
- If you’re an independent contractor, you get a 1099 form.
- If you’re an employee, you receive a W-2.
As a W-2 employee, payroll taxes are automatically deducted from your paycheck and then paid to the government through your employer. If you’re a contractor, you are responsible for calculating your own payroll taxes and then paying them to the government on a quarterly basis. Check this to see how a paystub for W2 Employee looks like - What will be the Take Home Pay if Annual Salary is $100,000?
Can a student on OPT work as Contractor?
Yes. Here’s the screenshot from ICE Guidelines.