Merchant Services Careers – What is Better? 1099 Or W2?
The field of merchant services careers continues to grow by leaps and bounds, bringing with it a surge of new career opportunities, especially in areas like account management, sales, marketing, and business development. As companies scramble to serve existing clients and recruit new merchants, the demand for talented professionals with experience in this industry remains sky-high. But, when it comes to merchant services career people are often confused between 1099 vs W2. This guide will help you to choose the right career.
Merchant Services Careers – What is Better? 1099 Or W2?
For those launching a career in merchant services, an essential choice lies in whether to pursue work as an independent 1099 contractor or as an employee under W2 status. Each path has its pros and cons regarding income, work-life balance, taxes, benefits, job security, and career progress. 1099 roles frequently afford more flexibility and potential for higher pay, while W2 positions typically mean the steadier paycheck, benefits, and stability of an employer-employee role.
There is no single “right” answer for every person or career situation. The ideal arrangement depends on individual priorities and risk tolerance as well as opportunities in your local job market. For those leaning into merchant services careers, understanding the key differences between 1099 contractor work and W2 employee work is critical to securing a role and situation primed to support success and career prosperity in the long run. In an industry where talent is perpetually in demand, choosing the superior path—whether 1099 or W2—can make the difference between job frustration and job bliss.
1099 Independent Contractor
As an independent 1099 contractor, you operate as a self-employed business entity providing services to merchant clients. Working as 1099 means avoiding the responsibility and costs of employee benefits and payroll taxes, giving you the opportunity to keep a larger percentage of the revenue you generate. However, it also means taking on greater financial risk and uncertainty as you are singly responsible for business expenses, self-employment tax, health insurance, retirement savings, and other benefits.
The compensation structure for 1099 roles is often based primarily on commissions and incentives rather than a base salary. This could result in higher potential earnings and an irregular income that is harder to predict. As 1099, you also have more flexibility and independence, allowing you to set your own schedule and have more control over the work you do. But you typically have less job security since engagements could be short-term, project-based, or terminated at anytime.
When working as a 1099, you must carefully manage your finances and ensure you are saving and setting aside enough to cover essential costs as well as self-employment tax obligations. The self-employment tax rate is 15.3% on your net earnings and is assessed on your total income minus deductible business expenses. As an independent contractor, you need to keep good records of expenses to minimize your tax burden. However, you also have more flexibility in deducting legitimate business costs, which employees typically cannot do.
There are opportunities to build a successful business and earn a high income working as a 1099 in merchant services. But there are also real risks and downsides to consider regarding income volatility, financial responsibility, lack of benefits, and job instability. The 1099 path is ideal for ambitious, financially-savvy individuals willing to take more personal risks in exchange for the potential for greater rewards. For others, the benefits and security of W2 employment may be preferable. In the end, you must weigh all factors and determine if working as an independent 1099 contractor aligns with your priorities, passion, and risk tolerance.
W2 Full-Time Employee
Working as a W2 full-time employee means accepting the responsibilities and costs of an employer-employee relationship, including payroll taxes, benefits, and job security. However, it also provides stability, steady pay, and protection from business expenses and financial risk. As a W2 employee, you receive a base salary, and often commissions, bonuses, and incentive pay on top of that. Your compensation will be received regularly and via paycheck, allowing for more financial security and stability than the often irregular income of independent contractors.
Employees also receive standard benefits like health insurance, retirement plans (401k, pension), paid time off (PTO, vacation, sick), expense accounts, tuition reimbursement, and more—depending on the employer. These benefits represent an ongoing financial value and important job perks that 1099 contractors typically must forgo or self-fund. In exchange for these costs, W2 employees usually have greater job security since terminations must follow legal procedures and nonrenewal of contracts tends to be less frequent. Seniority and strong performance also often lead to opportunities for career growth within a company.
As a W2 employee, you have less flexibility and independence since work schedules, responsibilities, and job requirements are determined by your employer. You also typically have a lower potential for a large financial payoff, though a stable salary and benefits. Employee pay also has deductions for income taxes and other withholdings taken directly from each paycheck. While this means less take-home pay, it ensures you avoid potential penalties and fees for underpayment of taxes.
The W2 path is advantageous for those seeking job security, benefits, a regular paycheck, and opportunities for career progression within an organization. However, the constraints of employee status and lower financial upside may not suit entrepreneurial individuals or those prioritizing work-life flexibility and independence. As with any career decision, you must evaluate all options based on your priorities, values, and circumstances to determine if working as a W2 full-time employee aligns with your goals and will set you up for well-being, prosperity, and professional fulfillment over the long run.
1099 independent contractors and W2 employees in merchant services receive compensation through different structures. As 1099, your payment is typically based primarily on commissions and incentives rather than a base salary. This means the potential to earn a higher percentage of the revenue you generate, but also income that can be irregular and harder to predict. With strong performance, 1099 contractors have the opportunity to make significantly more than they might as employees, while down months may see little to no pay.
In contrast, W2 employees receive a base salary in addition to commissions, bonuses, and incentives. Your base pay provides more stability and certainty, allowing for greater financial security. While the potential for high earnings may be lower than some 1099 roles, a W2 salary aims to compensate you fairly for your skills, experience, role, company, and location. Regular paychecks also make budgeting easier than the ups and downs often experienced by independent contractors.
As a 1099, the compensation you receive is reported to the IRS on a 1099-MISC form, and self-employment tax is assessed on your net earnings. This means paying both the employee and employer shares of Social Security and Medicare taxes, totaling 15.3%. W2 employees have taxes withheld from each paycheck, including income taxes and the employee portion of Social Security and Medicare taxes (6.2% and 1.45% respectively). While this reduces take-home pay, it ensures you avoid potential penalties for underpayment.
When evaluating 1099 vs W2 opportunities, compensation should be a top consideration. Determine if the potential to earn more through commissions and incentives outweighs the instability of irregular pay. Or if the stability and security of a base salary are more in line with your financial goals, even if high earnings are less likely. Your risk tolerance, priorities, and responsibilities all factor into deciding if 1099 or W2 compensation is superior for your needs. The right choice will ensure you feel fairly compensated for the value you provide, with income that supports financial well-being in the short and long run.
The tax implications of 1099 independent contractor and W2 employee status differ significantly. As a 1099, you are self-employed, so you must pay both the employee and employer portions of Social Security and Medicare taxes on your net earnings. This amounts to a combined 15.3% self-employment tax rate. You also pay income taxes on your 1099 income when filing your personal tax return.
1099 contractors can deduct legitimate business expenses to reduce their taxable income, including home office deductions, travel, supplies, and more if properly documented. The ability to deduct costs is one of the major financial benefits of 1099 status. However, for many, the additional responsibility of ensuring deductions are properly substantiated and reported offsets this gain.
W2 employees have taxes withheld from each paycheck by their employer, including income taxes and the 6.2% Social Security and 1.45% Medicare taxes that employees pay. While this results in less take-home pay, it ensures you avoid potential underpayment penalties at tax time. The expenses you can deduct as an employee are more limited, only including unreimbursed costs literally essential to your job.
When deciding between 1099 and W2 work, taxes should be a high-priority consideration. Determine if the potential tax savings of 1099 status outweigh the headaches of compliance and if the stability of W2 withholding is preferable to possibly owing taxes at the end of the year. Ensure any tax professional assisting you understand 1099 vs W2 requirements to ensure you pay what is legally owed while legitimately maximizing deductions. Underpaying taxes can lead to interest, penalties, fines, and even criminal charges in severe cases.
Employee benefits represent a key distinction between 1099 independent contractors and W2 employees. As a 1099, you do not receive any employee benefits from your clients or engagements. You must provide your own health insurance, retirement plans, paid time off, expense accounts, and other benefits—or do without them. Some 1099 contractors are able to deduct the costs of certain benefits when filing taxes, but coverage and plans still must be arranged and paid for individually.
In contrast, W2 employees receive standard benefits provided by their employer, including:
- Health insurance: Coverage for medical, dental, vision, and other healthcare costs. Employees may contribute to premiums but employers pay a large share.
- Retirement plans: 401(k), 403(b), pension plans provide financial security for retirement. Employers often match a portion of employee contributions.
- Paid time off: Vacation, sick, personal, and holiday pay allows for time off from work while still receiving compensation. PTO amounts increase with seniority and longevity.
- Expense accounts: Reimbursements for legitimate business expenses, travel, office supplies, mileage, and more. Strict policies ensure only approved and properly reported costs are reimbursed.
- Tuition reimbursement: Some employers provide assistance for job-relevant courses, certifications, degrees, and skills development. Amounts and requirements vary between companies.
The availability and specifics of benefits depend on your employer and role as a W2 employee. However, you have the security of knowing essential coverage and resources will be provided. Benefits represent an ongoing financial value and key job perk for most W2 positions. 1099 work means higher potential income but also sole responsibility for benefits at a higher total cost.
When evaluating 1099 vs W2 opportunities, benefits should be a priority factor in your decision. Determine what types of coverage and support are essential to your well-being and career goals. Ensure 1099 options could meet your needs at an affordable cost before forgoing the benefits often included with W2 jobs. The right choice for you will depend on balancing financial objectives with responsibility for benefits and all demands of employment. Consider benefits thoroughly to choose 1099 or W2 status confident your situation will work sustainably for years to come.
Job security and stability
Job security and stability represent another key difference between 1099 independent contractors and W2 employees. As a 1099, you have little job security since engagements are often short-term, project-based, or can terminate at any time. Even when working with a long-term client, there is always the possibility of a project ending, priorities shifting, or budget cuts impacting your role. While the flexibility of 1099 work is attractive to many, lack of stability can be problematic, especially when responsibilities like loans, families, or careers develop over time.
In contrast, W2 employees have much stronger job security and stability. It is difficult and costly for employers to terminate W2 employees except under very specific circumstances. Seniority, performance, specialized skills, or importance to key business functions create additional safeguards against job loss. The stability of ongoing employment allows for financial planning, career growth, and general well-being less threatened by the insecurities often facing 1099 contractors. Only restructuring, downsizing, relocation, or closure of a company or department typically threaten permanent W2 jobs.
Some 1099 roles do turn into long-term engagements or partnerships, just as some W2 positions prove unstable or temporary. However, there is significantly more inherent security in W2 employment for things within your control, such as work quality, skill development, teamwork, management relationships, and productivity. Termination generally requires documented poor performance, policy violations, or other legitimate business reasons—not just changes in project needs, budgets, or responsibilities as common impact 1099 work.
When deciding between 1099 independent contractor and W2 employee status, stability and security are essential factors to consider. Determine how much job loss risk you can tolerate and still achieve important life goals before pursuing 1099 work. Ensure your skills, experience, and work quality will make you an attractive long-term hire if seeking permanent employment. Evaluate the stability of potential engagements or companies and the likelihood of ongoing work before taking a 1099 role. The best choice for career and security will differ for each person and situation. Carefully weigh all pros and cons to decide if the flexibility of contracting truly justifies the instability or if the benefits of employment are most essential to your priorities and progress.
Legal and compliance issues
Legal and compliance responsibilities differ significantly between 1099 independent contractors and W2 employees. As 1099, you operate as a self-employed business entity, so you must ensure proper business registration or incorporation as well as licenses and permits required to legally provide your services. You are also solely responsible for compliance with federal, state, and local laws regarding things like liability insurance, workplace regulations, discrimination, harassment, wage laws, and more. Mistakes or failures to comply can lead to legal trouble, penalties, and a damaged reputation.
In contrast, W2 employees have minimal legal and compliance responsibilities regarding the business itself or employment relationship. Employers handle registration, licenses, permits, liability insurance, workplace policies, training, and all compliance to ensure a legally sound work environment and fair, ethical treatment of staff. As an employee, you simply must follow the policies and guidance provided—not determine what is required or ensure compliance yourself. Of course, poor performance, misconduct, or illegal activities can still lead to termination or legal trouble, but the responsibilities of compliance rest with the employer, not the employee.
Some level of compliance responsibility is reasonable and even provides increased control and independence for many 1099 roles. However, the additional burdens of running a business and ensuring all legal responsibilities are properly met should not be underestimated. If mistakes are made, penalties and damage to your professional reputation could be substantial even if unintentional. For those wishing to focus on their craft and working with clients, the hand-off of business and compliance responsibilities that often comes with W2 employment may be preferable.
The opportunities for professional and career growth vary significantly between 1099 independent contractors and W2 employees. As 1099, you have more control over the types of work you take on and the engagements or projects you pursue, allowing you to grow your experience and skills in any direction that interests you. However, you typically lack access to structured development opportunities, mentorship, succession plans, or salary progression that often accompany continued employment with the same company.
Growth as 1099 typically relies on constantly looking for new, more senior, or complex engagements, building your portfolio, strengthening personal networks, and developing a reputation for excellence that allows you to achieve higher rates and titles over time. While possible, progression is seldom guaranteed without the strategic workforce planning present in most W2 roles and organizations. Some 1099 contractors do turn long-term engagements or partnerships into stepping stones for career growth, but this is not inherent or automatically provided like it tends to be with permanent employment.
In contrast, W2 employees usually have far greater access to guided development opportunities that aid professional growth. Things like:
- Mentorship: Experienced leaders mentor high-performing employees, advising them on skills to strengthen, opportunities to seek out, and paths to career progression.
- Succession planning: Organizations work to develop talent from within to fill key roles as they become available. This allows employees insight into future directions and a pipeline for growth.
- Performance management: Regular reviews, feedback, and development planning with managers help employees advance in their careers strategically and according to business needs.
- Tuition reimbursement: Many employers invest in developing strong talent by providing assistance for advanced degrees, certifications, courses, and skills training.
- Promotion: When skilled, high-performing employees are promoted into higher-level roles, it provides motivation and a clear path forward for career growth throughout an organization.
- Mentorship of others: As employees gain experience and take on more senior responsibilities, opportunities to mentor new talent often arise, further enhancing leadership abilities and career progression.
Overall, the path that provides the most and most meaningful opportunities for growth depends on your priorities, strengths, and long-term career objectives. Carefully evaluate both 1099 independence and W2 employment before deciding which option will enable you to achieve your full potential and build the career or business you desire. With insight into growth at both types of companies and roles, you can choose 1099 vs W2 status confident in your ability to cultivate success regardless of the path.
Choosing between 1099 independent contractor and W2 employee status is a complex decision that depends on balancing many factors. The pros and cons of each path are compelling, so determining what will set you up for success and career bliss versus job frustration requires thoughtful evaluation of options based on your priorities, values, responsibilities, financial needs, risk tolerance, and career goals.
1099 work provides independence, flexibility, the potential for high earnings, and control over business responsibilities—but also instability, isolation, higher costs of business, and compliance burdens. W2 employment offers security, stability, benefits, and limited responsibilities—but typically lower financial upside potential and less flexibility. There is no single superior choice, only the one that works best for your unique situation and objectives.
Things like work-life balance needs, financial responsibilities, career growth priorities, job requirements, and industry norms must all factor into your decision. Discuss options with a mentor, career coach, or others currently or recently in similar roles. Intern or shadow if possible to gain exposure firsthand. Learn as much as you can about the distinctions in costs, benefits, responsibilities, and potential advantages of 1099 contracting versus W2 employment.
Weigh each option objectively using criteria that reflect what matters most for long-term success, prosperity, and well-being in a career you find genuinely fulfilling. Choose the path that places the fewest burdens on other life responsibilities or balances them well—rather than either high demands with rewards that may not justify or little responsibility with rewards far outpacing contributions. The strongest companies and most worthwhile work opportunities can be found on both sides of 1099/W2—so focus on the unbiased pros and cons for your needs.
With insight into all aspects of possibilities, you can confidently transition into a merchant services career as the independent contractor or employee that serves you best. Know the challenges ahead, the resources available, and how to leverage opportunities to unlock your potential no matter what path you forge. Growth, success, and career bliss can result from either choice—but only you can determine the options providing the greater odds of achieving them on your own terms. Make the choice that you can feel good about not just picking but committing to fully as you build momentum in your new career. Choosing a 1099 or W2 should be an easy decision, not one looking back with regret.