1099 employees are not subject to withholding, but they do pay tax. Typically this is done in installments, 4 per year.
1099 employees may be able to write off certain expenses that W-2 employees cannot. They can also avoid some social security taxes which W-2 employees cannot. All of this requires some setup fees and there needs to be some working capital in place prior to getting their first pay check.
If this is a short term contract, then it is almost always better to be a W-2 employee. W-2 employees may be also qualify for fringe benefits, which have to be self funded as a 1099.
1099 employees may be able to contribute more to retirement and have more control over the investments. They also have to file costly tax returns.
Currently I am a 1099 and it is working out great. However, it has been long term, I am currently in month 20, and have been extended another year. Also I have a wife that provides benefits for me through her work. I can deduct from my profit certain expenses that lowers my income. Since I am setup as a corporation, I pay myself a smallish salary and take the rest of my profit as dividends from the corporation. This saves on a great deal of social security tax, but also reduces my earnings for social security purposes which might effect one negatively.
On the minus side, I pay about $800 per year to file my business taxes. Figure another 2500 in business taxes, insurance, and payroll fees.
On the plus side I am able to setup a solo-401K for no charge. I can come pretty close to putting in 50K per year if I desire. My investment choices are limitless and there is no fee. If I was a W-2 employee I could be limited to putting in ~22k, have poor investment choices, high fees, and may be subject to vesting on employer contributions.
So there is a lot of benefits, but it does not come without responsibility, management time, or costs. I just got smacked with a fee from the state because I did not file something on time.
It has to be right for you.