Difference Between W-2 Form and 1099-NEC

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Are you a business owner and running a business in the United States?

 You are supposed to file your annual wages to those who work for your business and that details must be reported with the Social Security Administration (SSA) and the Internal Revenue Service (IRS) as well. 

Once you determine whether someone who works for your company is an employee or an Independent contractor you will get to know which reporting form to give that individual.

 

Employee vs Independent contractor

To Reduce confusion, the IRS published some criteria to determine whether an individual needs to file Form W-2 or 1099-NEC. 

If a business owner hires an individual and pays wages, tips, and other compensation for a tax year they are supposed to report Form W-2, or If a business owner paid more than $600 for an independent contractor in a tax year then they have to file Form 1099-NEC.


W2 Form:  

IRS Form W-2 is used to Report employee’s annual wages and the amount of taxes withheld from their paycheck. Form W-2 employer must send to an employee and the Internal Revenue Service (IRS) at the end of each year.

The Form W-2 includes:

  • Employee’s Taxable income and how much federal income tax is withheld from employee's paycheck.

  • Social Security and Medicare taxes that have been withheld from the employee's paychecks.

  • State income taxes and the amount withheld from the employee's paychecks.

  • Employee tip income 

  • Taxable and non-taxable employee benefits

Form 1099-NEC

To report non-employee compensation IRS introduces a new Form 1099-NEC. 

If an employer pay them $600 or more than that to an independent contractor during a tax year they are supposed to report under Form 1099-NEC


The Form 1099-NEC includes:


  • Employer details 

  • Recipient’s details

  • Total nonemployee compensation

  • Federal and state income tax withheld if any


Visit, https://www.taxbandits.com to know more about filing Form W2, and 1099-NEC with the federal and state agencies.

 

TaxBandits allows you to File your Tax Form with the IRS and send your recipient copies on-time. 


Get started with TaxBandits today and e-file your Tax before February 1, 2021.



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