Xplor Payroll Processing treats employees and contractors as two distinct categories. The distinction isn't cosmetic; it changes how taxes are calculated, how payments are sent, and which forms are filed at year-end.
The employee-vs-contractor decision isn't a preference. The IRS has specific rules about who qualifies as a contractor vs. an employee. Misclassifying an employee as a contractor can result in penalties, back taxes, and interest. If you're unsure, consult your accountant or tax advisor.
| Employee (W-2) | Contractor (1099) |
Tax withholding | Federal, state, and local taxes are withheld from each paycheck. You also pay employer taxes (Social Security, Medicare, and unemployment) on top. | No taxes withheld. The contractor is responsible for their own estimated tax payments. |
Onboarding forms | W-4 (tax elections), I-9 (work eligibility), and direct-deposit setup. | W-9 (taxpayer ID), direct-deposit setup. Simpler and faster. |
Year-end tax form | W-2 issued by you showing wages and taxes withheld. | 1099-NEC issued by you showing total compensation paid. |
Workplace required? | Yes — the payroll processor needs to know which studio location they work at so it calculates jurisdiction-specific taxes correctly. | Optional. You can pay contractors without a workplace assignment. |