W2 vs C2C vs 1099 — Explained for US IT Recruiters

You find a strong consultant. You quote a rate — let’s say $65 an hour. The consultant replies with one short question:

“Is that W2 or C2C?”

And you freeze. Because the truth is, you’re not fully sure what the difference is — and the consultant can hear it in your pause. In US IT staffing, that one moment quietly decides whether a consultant takes you seriously.

W2, C2C, and 1099 are the three ways a consultant gets engaged on a US contract. They decide who employs the consultant, who handles their taxes, what benefits exist, and — the part that matters to you every single day — what rate you can actually offer. Get them mixed up and you lose credibility in one sentence.

This guide makes all three click, for good.

The One Question Behind All Three

Forget the jargon for a second. All three models are really answers to one question:

That’s it. Once you know the answer, everything else — rate, benefits, paperwork — follows.

• W2Your company employs the consultant. You handle their taxes.
• C2CAnother company employs the consultant. You contract company-to-company.
• 1099Nobody employs them. They are an independent contractor handling everything themselves.

Keep that frame in your head as we go through each one.

W2: The Employee Model

On W2, the consultant becomes an employee of your staffing company (or of an employer of record working with you).

That means your company withholds their taxes — federal, state, Social Security, and Medicare — and issues them a W-2 form at the end of the year. Your company also pays the employer’s share of payroll taxes. Depending on the company, the consultant may also get benefits like health insurance.

Because the employer is carrying taxes, benefits, and overhead, the consultant’s hourly rate on W2 is lower than the same role would pay on C2C. They are trading a higher headline number for someone else handling the paperwork and compliance.

C2C: The Company-to-Company Model

C2C stands for Corp-to-Corp. It is a contract between two companies: your staffing company on one side, and the consultant’s company on the other — either their own registered company (an LLC or S-corp) or another vendor’s company.

Here the consultant is not your employee. Their company handles their taxes. You pay their company against an invoice, with no tax withholding on your side.

Because the tax and benefit burden now sits on the consultant’s side, the headline rate on C2C is higher than W2 for the same role. The consultant then pays their own taxes out of it.

1099: The Independent Contractor

On 1099, the consultant is a true independent contractor — not incorporated, and not your employee. You pay them directly with no withholding. They receive a 1099-NEC form and pay their own self-employment taxes.

This is the least common model in IT staffing today. Tax authorities and labour departments look closely at whether a “1099 contractor” is really functioning like an employee — getting this classification wrong carries real penalties — so many staffing firms avoid 1099 altogether.

You will still run into it occasionally. For now, just know it exists, how it works, and why it is used sparingly.

The Three Side by Side

Here is the whole picture on one screen. This is the table worth memorising.

	W2	C2C	1099
Who employs	Your company	Consultant’s / another company	No one (independent)
Who handles taxes	Your company withholds	Their company handles	Consultant handles (self-employment)
Benefits	Often yes	No	No
Headline rate	Lower	Higher	Higher
Year-end form	W-2	Company invoices (1099 to corp)	1099-NEC
Key paperwork	Offer letter, I-9	MSA, W9, COI	W9
Best for	Visa holders needing payroll / benefits	Incorporated consultants & vendor placements	True independents (rare)

Why the Rate Changes With the Model

This is the most practical thing in the whole article, so slow down here. For the same bill rate from the client, the rate you can offer the consultant is different on W2 versus C2C.

On W2, your company has to cover the employer’s payroll taxes (around 7.65% in FICA alone, plus unemployment insurance) and sometimes benefits — all out of the spread between bill rate and pay rate. So the W2 pay rate comes out lower. On C2C, those costs shift to the consultant’s company, so the headline number is higher — but the consultant then pays their own taxes from it.

The lesson is simple and non-negotiable: never quote a number without saying which model it is for. “$70 on C2C” and “$70 on W2” are two completely different offers.

How Visas Decide the Model

You don’t always get to pick the model — the consultant’s work authorisation often decides it for you.

• USC / GCFully flexible — W2, C2C (if they have a company), or 1099.
• GC EAD / H4 EAD / L2 EADFlexible — usually W2 or C2C.
• OPT / CPTStudents and recent grads — typically W2 with the employer, rarely C2C.
• H1BMust work for the sponsoring employer. Usually placed C2C through that employer, or transferred onto your company’s W2 with a new petition. You can’t simply put someone else’s H1B on your W2 without sponsoring the transfer.

How to Ask a Consultant

You don’t need to interrogate anyone. Five clear questions tell you everything you need before you submit.

• 1
  “Are you on your own W2, do you have your own company, or are you working through an employer?”Tells you which models are even possible for this consultant.
• 2
  “Are you open to W2, C2C, or both?”Never assume. Plenty of consultants prefer W2 for the benefits and simplicity.
• 3
  “What rate are you expecting — and is that on W2 or C2C?”Always tie the number to a model, every single time.
• 4
  “What is your work authorisation?”Because it constrains which model is allowed.
• 5
  “If C2C, what’s your company or who is your employer?”You need to know exactly who you’ll be contracting with.

Mistakes Freshers Make

• No modelQuoting a rate without saying W2 or C2C — the fastest way to confuse a consultant and lose trust.
• Assuming C2CBelieving every consultant wants C2C. Many prefer W2 for benefits and a simpler setup.
• Comparing apples to orangesTreating a W2 rate and a C2C rate as the same number when they are not.
• Ignoring the visaOffering C2C to someone whose work authorisation only allows W2.
• Skipping the “who”Not confirming whose company is on a C2C contract before submitting.

Quick Glossary

Term	What it means
W-2	The US tax form for an employee. “On W2” means employed by your company.
C2C	Corp-to-Corp — a contract between two companies, not an employment relationship.
1099-NEC	The tax form for an independent contractor’s earnings.
FICA	US Social Security and Medicare payroll taxes (around 7.65% on the employer side).
Employer of Record	A company that legally employs the consultant on your behalf and runs payroll.
MSA	Master Service Agreement — the contract between two companies on C2C.
W9 / COI	Tax-info form and certificate of insurance — standard C2C paperwork.
Misclassification	Wrongly treating someone as a contractor when they are really an employee — the risk that limits 1099.