If you are looking at US IT contract roles, you will see three labels again and again: W2, C2C and 1099. They describe how you get paid and who is responsible for taxes, insurance and paperwork. This guide explains what each one means in plain words, so you can ask better questions before you accept an offer.
This is general information, not tax, legal or immigration advice. Confirm your own situation with a qualified CPA or immigration attorney.
What does W2 mean?
On W2 you are an employee of a staffing company or an end client. Your employer withholds income tax, Social Security and Medicare from each paycheck and files a W2 form for you at year end. Many W2 roles also offer benefits such as health insurance, paid leave or a 401(k), though this depends on the employer and the contract.
- Taxes: handled through payroll withholding.
- Paperwork: simple. You fill a W4 and submit timesheets.
- Good fit for: candidates who want predictable paychecks and less admin, and many candidates who are on a work authorization tied to an employer.
What does C2C (Corp-to-Corp) mean?
On C2C, you work through your own registered company, usually an LLC or a corporation. Your company signs a contract with the vendor or client and sends invoices. You are not on anyone’s payroll. You are responsible for your own business taxes, insurance, accounting and any benefits you want.
- Taxes: paid through your company. A business accountant is strongly recommended.
- Paperwork: more. Company registration, invoices, contracts, sometimes liability insurance.
- Good fit for: experienced consultants who are legally allowed to work this way and who are comfortable running a small business.
What does 1099 mean?
On 1099 you are an independent contractor, usually as an individual without a separate company. The client pays you gross and reports it on a 1099 form. You pay your own income tax and self-employment tax, and you usually pay for your own insurance. Contract rates on 1099 often look higher than W2 rates for this reason, but the extra amount is not all take-home.
Side by side
| W2 | C2C | 1099 | |
|---|---|---|---|
| Who you work for | Employer | Your own company | Yourself, as an individual |
| Taxes | Withheld by employer | You, through your company | You, including self-employment tax |
| Benefits | Often available | You arrange them | You arrange them |
| Admin work | Low | High | Medium |
| Rate quoted | Lower hourly | Higher hourly | Higher hourly |
Which one can you take?
This is the question that matters most, and it depends on your work authorization.
- US citizens and green card holders can generally choose any of the three.
- H1B holders are generally authorized to work only for the employer that sponsors them, so C2C or 1099 arrangements are usually not allowed. Check with your sponsor and an attorney.
- OPT, CPT and STEM OPT students have rules about who can employ them and in what field. Do not assume any contract type is allowed. Ask your school’s international office (DSO) first.
If a recruiter pushes you toward a structure that does not match your status, slow down and ask for it in writing.
Questions to ask before you say yes
- Is this role W2, C2C or 1099, and is it written in the agreement?
- Who pays me, and how often? Weekly, bi-weekly or net 30 or 45 after the invoice?
- What happens between assignments? Is there any bench pay, or none?
- Are there benefits, and who pays for them?
- How long is the contract, and is there an extension or end-of-assignment notice?
- Does the client require a specific work authorization?
How to compare two offers
Do not compare hourly rates directly. Convert each offer into what you actually keep in a year. For W2, subtract your tax and what you would pay for health insurance. For C2C or 1099, subtract business costs, self-employment or corporate taxes, insurance, accounting and unpaid days between contracts. A lower W2 rate with benefits can come out close to a higher C2C rate once everything is counted.
Common questions
Is C2C always better paid than W2?
Not always. The hourly rate is usually higher on C2C, but you carry costs that an employer covers on W2: part of payroll tax, benefits, insurance and unpaid time between contracts. Compare yearly take-home, not the hourly number.
Do I need my own company for C2C?
Yes. C2C means the contract is between two companies, so your own registered entity is required. The setup, the rules and the tax treatment depend on the state and on how you structure it, so speak with an accountant before you register anything.
Can I switch from W2 to C2C later?
Many consultants do, once they have steady experience and the legal right to work that way. Switching mid-assignment usually needs agreement from the vendor and the client, so ask early rather than assuming.
What should be in the agreement?
The contract type, the rate, the payment schedule, the start and end dates, the notice period, and who is responsible for expenses. If anything on the recruiter call is missing from the written agreement, ask for it to be added before you sign.
Next step
Still deciding how to position yourself for contract roles? Read our guide on contract vs full-time IT jobs in the US, see how our H1B, OPT and CPT support works, browse our training courses, or start with our candidate team.
