Checklist for IRS 1099 vs W2 Employees

The criteria for IRS 1099 vs W2 workers is sometimes confusing to understand for employers. Each situation has its differences, so it is important for employers to be well aware of how to classify their workers correctly and file the right forms when tax season arrives. We will go in-depth into how the IRS views each type of employee and explain how a quality tax software makes filing for both simple.



IRS 1099 vs W2 Distinguishing Work Characteristics

The IRS provides three categories which assess the level of interaction between a worker and an employer. They are:

  1. Behavioral: The behavioral aspect refers to how much an employer has the right to control how a worker does a job. W2 employees follow directions from their employer, including when and where to work, what tools to use, and who must perform which task. Additionally, W2 employees receive more detailed instructions than 1099 workers and are subject to an evaluation system of how they work at the employer’s discretion. Finally, employers provide training to W2 employees on the particulars of how to do the job. 1099 contractors use their own methods and only face an assessment once they complete the work.
  2. Financial: Certain financial aspects of a worker can help determine the type of employment. Many 1099 contractors make investments into their equipment and materials, unlike W2 employees who receive their work materials from their employer. Employers are not responsible for reimbursing expenses or making up for a loss for 1099 contractors. Another financial indicator is how an employer pays the worker. W2 employees receive a regular wage over a set period of time while 1099 contractors earn a flat fee for their job.
  3. Type of Relationship: Certain relationship factors indicate a worker’s status. Employers typically do not provide employee benefits, like insurance or paid vacation, to contractors. Employers usually hire W2 employees to work indefinitely instead of for a small project or period of time. Additionally, W2 employees typically fulfill a key function of a business whereas a 1099 contractor completes secondary tasks or one-off projects.

Fully grasping IRS 1099 vs W2 takes time and careful attention. There are additional resources for understanding the complexities of the two types of employees. For example, this document from the state of Oregon’s website has an expanded list of 20 factors which can help employers understand the status of their workers.


Filing IRS 1099 vs W2 with AMS Tax Software

As an employer, you will likely have to file taxes for both 1099 contractors and W2 employees through the course of your business operation. Classifying your workers correctly is just part of the battle with year-end taxes. You must also know which form to file for each employee and file on time with accuracy.



AMS has a combined 1099 and W2 Forms Software Filer, whose features are customizable to your needs. AMS software allows you to create individual employee files to keep their information organized. Additionally, you do not need to be a tax form export to navigate the easy, menu-driven format. These features and more allow you to conquer tax season no matter which types of employees you hire.


Software Solutions from AMS

Our W-2 and 1099 Forms Filer is our only required platform. From there, users pick the services they need. Choose from the tools below to build out your customized accounting software.