The way that employers hire workers today is a much different process than two years ago. The coronavirus pandemic changed whether you hire contract 1099 vs w2 workers. Therefore, it is important to know the difference between the workers. When you onboard a new person for a project or company, you should know the distinction between these workers. Knowing these differences will make tax season much less stressful.
Are 1099 Workers Considered Employees?
The short answer is, no. A 1099 worker is better understood as a freelancer or an independent contractor. These are the types of people you may hire for a specific assignment or project. The chances are likely that they are hired because they are skilled in one area. As non-employees, your company does not pay them wages or a salary. You and each 1099 worker establish a predetermined compensation. You do not withhold income taxes or pay unemployment taxes.
What Tax Form is Used for 1099 Workers?
The big difference between contract 1099 vs w2 workers is the necessary tax forms. Request that your independent contractors complete Form W-9. As an employer, you are expected to keep these records for four years. When hiring a 1099 worker, you will also likely need to complete two 1099-NEC forms (Copy A and B). These forms are filled out for the 1099 workers who you paid more than $600 in the past calendar year.
What is a W2 Employee?
Given the rise of independent contractors, W2 employees may seem increasingly rare. W2 employees are full-time employees. You hire these employees with a standard employment contract. The contract will typically offer a salary, tax withholding, and a number of benefits. These W2 employees must follow company rules and the hours that are outlined for their position. As an employer, you fill out a W2 tax form for these employees. If you take away any knowledge from hiring contract 1099 vs w2 workers, it is that you should stay on top of these forms all year.
How Does AMS Help During Tax Season?
An efficient, reliable tax software is important to have for your business. The good news is our software at Advanced Micro Solutions fits a diverse set of needs. Our W2 and 1099 Software generates all 1099 and W2-related forms. The software costs $84 and only requires that you enter payer information one time. The software also supports as many as 99,999 employees and/or recipients per payer.
There is no reason to file your 1099-NEC or W2 forms by hand during tax season. Filing taxes electronically is not only more efficient, but it also limits your chances of errors. Our software lets users import data from different sources. The sources include Excel, form print files, and ordinary text files. Through the module interaction feature, you can also use the E-Filer. The E-Filer electronically submits your year-end forms directly to the Internal Revenue Service. Whether you hire contract 1099 vs w2 workers, make sure to review our software options.