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Are Truck Drivers W-2 or 1099 Employees?

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Do Your Truck Drivers Need a 1099 or W-2?


For new trucking company owners, the ramp-up work doesn’t stop once you’ve paid all your startup fees and you have your operating authority. Now it’s time to find yourself drivers. You may certainly decide to be your own company’s driver, in which case you would be a one-person operation.

But if you choose to hire truckers to haul your loads, you have decisions to make that go beyond merely seeking a trustworthy driver who can safely transport the goods. Are you looking for an owner-operator, independent contractor, or a company driver?

What’s the difference? Why does it matter? Well, let us help you decide and explain what you need to know. So that come tax time you’ll understand what makes them a 1099 or a W-2 employee.

What is a 1099 Employee?

A 1099 employee is one person or an entire company that you hire to do a specific job for you. That job and all its parameters, including pay rate, would be spelled out in the contract that you and your 1099 employee sign. In trucking, your 1099 employee would be an owner-operator or an independent contractor.

A 1099 employee is not a company driver, so that means you don’t provide benefits for them (say, such as health insurance). You also don’t take out any government taxes from their pay. Instead, you provide an IRS 1099 form that details the amount of money you paid your owner-operator in the previous year. 1099 employees pay their own taxes and report their own income to the IRS.

What is the Difference Between an Owner-Operator and an Independent Contractor?

None, really. An owner-operator and an independent contractor are basically the same. It’s just a matter of title. The former is more of a trucking industry term and the latter is an IRS phrase.

However, there are slight variations in owner-operators:

  • Leased onto a company – An owner-operator has the truck, only hauls for the carrier they sign with, and uses that carrier’s authority. This would be stipulated in the contract, which should be verified by a legal professional to avoid any issues.
  • Not leased onto a company – An owner-operator has the truck and their own authority. They haul some for you, but they usually find their own loads and are a free agent.

Using owner-operators to haul loads could be cost-effective for trucking companies because they save money in onboarding and benefits. The downside is you may not get the same level of loyalty that you would from a company driver.

What is a W-2 Employee?

A W-2 employee is a company driver. W-2 employees get a steady weekly or bi-weekly paycheck that reflects an agreed-upon wage where you deduct social security and Medicare taxes. You pay payroll taxes (withholding taxes) for all W-2 employees. You may also provide insurance benefits for them. Essentially, you invest in them to ensure your long-term success.

Instead of an IRS 1099 form, they get an IRS W-2 form in January that details their earnings from the previous year. This form also discloses the cumulative amount of taxes that were deducted from the employee’s paycheck for the entire year. Employers send W-2 forms for all their employees to the IRS, state, city, or local tax department, social security administration, and the respective employee, of course.

The advantage of having company employees instead of contractors is the ease of assigning work and the dependability that usually comes with full-time employees; however, you pay taxes for them, and typically invest in other benefits such as medical insurance, holiday and vacation pay.

The way to decide which is best for your business, whether a 1099 or a W-2 employee, is by drafting a business plan that includes a set of short-term and long-term goals. Then it should become easier to see which type of employee fits into your grand vision.


Factoring your freight invoices is a great way to ensure you have the fast cash you need for payroll or 1099 expenses. Become an Apex factoring client today and enjoy world-class customer service, a series of tools to help your trucking company grow, and a dedicated account executive ready to guide you to success. We are ready for you! Visit our website or give us a call at 855-369-2739.