Printed 2017/08/20 06:08AM

Consultants: Corp-to-Corp vs 1099


I blogged previously that when you are a consultant or contractor, you can sometimes be faced with the decision when taking a new contract of whether to go 1099 or W-2 (Consultants: 1099 or W-2?).  However, some staffing firms or clients don’t do 1099, but instead do Corp-to-Corp (C2C).  In short, Corp-to-Corp means that your client, which is a corporation, pays your business, which is organized as a corporation, for the services rendered by you.  Your client may prefer this instead of 1099 as it protects them from the risks regarding the employer-employee relationship (even though you are paid via 1099, the IRS might still consider you an employee and disallow your independent contractor status.  See IRS Publication 1779: Independent Contractor or Employee? and Consultants, know how the IRS determines employee status.  If this were to happen, the company you work for would owe back payroll taxes, so some companies prefer Corp-to-Corp to avoid this situation).

I have done C2C a few times when I was subcontracting for a consulting company.  You might find clients that have a checklist similar to the one below that you must adhere to in order to do a C2C (some call it an “Independent Consultant” (IC) agreement):

The major difference between C2C and 1099 is that with C2C, you don’t have to pay self-employment taxes on your income.  However, you do have to pay yourself a salary and with it both employer and employee taxes.

More Info:

Consultants: W-2, 1099 or Corp-to-Corp?

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