Your question is a little confusing. No one is "paid by" W-2 or 1099. W-9s and 1099s are forms that are used for reporting payment and deductions to the payee and to the government. Employees get W-2s, independent contractors and outside businesses get 1099s. If you are an employee you are paid a regular wage from which certain amounts are withheld, including Federal and State taxes and FICA and medicare contributions. If you are an employee, these deductions are mandated; they are not optional. After the end of the year, your employer will provide you with a form W-2, which specifies how much you were paid and how much was withheld for each catagory of deduction. A copy of this form is also sent to the Federal government. If you are an independent contractor, you are not an employee. You will be paid whatever amount you have agreed on or billed. No deductions will be made (except under certain circumstances that don't come up often). If you are providing a service, or under certain other circumstances, and the amount you have been paid is over a certain annual threshold, after the end of the year the company that paid you will send you a form 1099, which details how much they paid you during the previous year. A copy of this form is also sent to the federal government. The question of whether someone is classed as an employee or as an independent contractor can be a little complex. It's also one that the IRS and various other agencies look at VERY carefully, as it is often abused. In general, you are an employee if your employer tells you what time to be at work and what to do and has the right to discipline you. (This is a huge oversimplification, but it gives you the idea.) To qualify as an independent contractor, you need to be truly working for yourself. Generally this includes having more than one client or source of income for your work (though for consultants this isn't necessarily true), setting your own work schedule, and working completely autonomously. For instance, if you have been working as an employee for a particular company you generally can't qualify to be paid legally as independent contractor by the same company for the same work unless you clearly take on other clients, as well. So what your'e really asking is what are the relative advantages and disadvantages of being an employee or being an independent contractor, which means being in business for yourself. As an employee, you have the advantage of a regular paycheck and benefits such as paid vacation, sick time, health insurance and retirement plans. (Benefits vary from employer to employer.) Ideally you'll have a chance to get raises and/or promotions. On the down side, you're working for someone else. You go to work when they tell you, you do what they tell you, you take your vacation when they let you. If you are an independent contractor, you're working for yourself. You set your own hours and only do the work you want to do. However, if you want to make a living at it, you may find that you have to work harder than as an employee, because you'll have a lot of "employer" stuff to do for yourself. Depending on what kind of work you're doing, you'll need to find your jobs/clients, handle your own billing (and collections), manage your money to get through slow times, and pay for your own insurance (which is very expensive for an individual). You'll be responsible for meeting any licensing or certification requirements in your state, not just for your profession but for your business as well. You are also responsible for depositing your own "withholdings," such as Federal and State taxes and FICA and medicare contributions. Most employees don't realize that the FICA and medicare contributions that are withheld from their paychecks are matched by their employer. If you are an independent contractor, you have to pay BOTH parts of the contribution - the part an employee would pay AND the part the employer would pay. As for the "corp to corp" thing, if you have your own business, you have the option of incorporating, but the advantages and disadvantages of that is an entirely different issue.

There are services out there that combine the advantages and mitigate the disadvantages of both alternatives. They are called employer of records. You are technically a W2 Employee, however not in the traditional sense. Your employer of record, will manage the back office for you, by invoicing your client, collecting payment, providing you insurance, making it easy to be a consultant. However you are responsible for finding your own projects; in essence you are still your own boss, jumping from contract to contract. This way you dont have to mess around with tax filings, but you still get to operate and feel like a consultant, and build your own business. The best one out there I know of it MBO Partners.