Form W2 vs 1099 - What’s the Difference?
Written by Stephanie Glanville
Stephanie Glanville is the Marketing Manager of TaxBandits. She has several years of experience with IRS tax forms and the funtionality of TaxBandits. With a passion to help business owners better understand their IRS tax forms and filing, she aims to create content that is valuable and informative.
Form W2 vs 1099: An Overview
Forms W-2 and 1099 are crucial for reporting income, but they serve different purposes and have specific requirements based on employment status. When it comes to tax reporting to the IRS, these forms report different types of payments to ensure
accurate filing.
This article explores the key differences between the filing requirements for Form W-2 and Form 1099.
Form W2 vs 1099: What's the difference?
Form W-2 reports the income paid and taxes withheld from full-time employees' paychecks during the year. On the other hand, a 1099 Form is used to report income or other payments made to non-employees, typically independent contractors, freelancers, or other non-payroll professionals, during
the year.
This table outlines the main differences between Form W-2 and Form 1099.
| Aspect | Form W-2 | Form 1099 |
|---|---|---|
|
Purpose |
Form W-2 reports the wages paid to employees during E-file W-2 with TaxBandits |
Form 1099 reports payments made to non-employees during the year E-file 1099 with TaxBandits |
|
Who Uses It? |
Employers |
Any one who paid payments to any individuals or businesses |
|
Who Receives it? |
Full-Time employees |
Non-employees (e.g., independent contractors, freelancers, or |
|
Deadline |
The deadline to file W2 with SSA and distribute W-2 form copies to employees is January 31. Click here to learn more about the |
The 1099 deadline will vary based on the Form type. In general, the deadline is January 31. Click here to learn more about the |
|
Information Reported |
Wages, Taxes withholding, Social Security, and Medicare taxes. |
Payments Made, backup withholding information (if the recipient does not provide the correct TIN through Form W-9 to the businesses (payer)). |
|
Tax Rates Responsibility |
For the W-2 Form, the employer pays half the Social Security and Medicare (FICA) taxes, which amounts to 7.65% of the employee's wages. The remaining 7.65 percent is withheld from the employee's paycheck by the employer and submitted to the IRS. |
Independent contractors who receive 1099s are liable for the full 15.3% self-employment tax on their earnings. They are responsible for the FICA (Social Security and Medicare) taxes. |
Difference between employees and contractors.
Employees maintain a formal, often long-term relationship with their employer and are eligible for health insurance, retirement plans, and paid time off benefits.
In contrast, contractors—often called independent contractors or freelancers—are hired temporarily or for specific projects and do not qualify as regular employees. They do not receive employee benefits from the companies that engage them.
Simplify your W-2 and 1099 filings effortlessly with TaxBandits!
TaxBandits supports e-filing for all the necessary IRS forms, including W-2, W-9, and 1099. Understanding your responsibilities regarding these forms is crucial to avoid potential penalties.
With built-in validation features like TIN matching and internal audit checks, TaxBandits ensures the accuracy of your submissions, minimizing the chances of errors that could lead to IRS inquiries.
You can distribute W-2 and 1099 copies to employees or recipients promptly, using postal mail, online access, or both.
See how TaxBandits simplifies the W-2 filing and 1099 filing.
