Since employers will likely hire different types of employees, it is important for them to know is a W2 the same as a 1099 to file the correct income forms. Both serve a similar function, but they have key differences. We will cover the difference and explain how a tax software can help you file both.
What Are the Differences Between a W2 and a 1099?
Beyond the W2 and the 1099 visually looking different, the forms have unique features that set them apart. They do share the same purpose of reporting income, but they apply to different workers. So, is a W2 the same as a 1099? No, and here’s why.
The language in the forms is the first area of difference. If you look at the W2, you will notice the form asks for the employer’s identification number and contact information. On the 1099, you, as the “employer,” complete the payer’s name and TIN. This subtle phrasing reflects the relationship between an employer and a W2 employee versus an independent contractor.
The forms also ask for separate identification. A W2 requires an employee’s SSN while a 1099 requires the independent contractor’s TIN. A SSN is a TIN for many people, but some contractors may not have a SSN for various reasons and instead have a personal TIN they use.
The categories are another area of difference. Since employers withhold taxes from a W2 employee’s pay, the W2 has categories that indicate how much money went into each category. The categories include Social Security and Medicare along with federal and state taxes. An independent contractor pays the Self-Employment tax on their own, so the 1099 does not have these categories.
Which Form To Give to Which Workers
Another way to answer is a W2 the same as a 1099 is to address who gets which form. Employers should know how to differentiate between a W2 employee and a 1099 contractor. The IRS lays out three criteria to help distinguish the two: behavioral control, financial control, and relationship. In essence, a W2 employee is on your payroll and a contractor is an independent worker you hire for a project.
Any employee that completes a W-4 needs a W2 for year-end taxes. If you pay an independent contractor more than $600 during the year, you file a 1099 for their income. Independent contractors pay their own taxes, so you do not deduct anything from their pay. You do, however, deduct a certain percentage in FICA taxes from your W2 employees.
File Both Forms Easily with AMS
Clearing up the question, “Is a W2 the same as a 1099?”, is half of handling the forms correctly and efficiently. A tax software tool is a great resource for employers who do their own taxes. The AMS w2 and 1099 filer is a budget-friendly and easy-to-use module for your tax forms. You can keep all your employee and contractor files organized and make sure you file the right forms for each. Reach out to our Sales and Information team at (800) 536-1099 with any questions.