Differences in Filing Taxes 1099 vs W2

Questions about taxes 1099 vs W2 arise each year as employers prepare for tax season. Your business may have employed both employees and independent contractors in one tax year. If this is the case, you will need to know how to file taxes for each type of worker since the requirements differ. Employers can reference this post to know the features of each tax form and the situations that you would use each form. No matter what types of employees you hire throughout the year, AMS tax software can help you file all the right forms accurately.



Features of Tax Form 1099 

The 1099 tax form is for miscellaneous income, and the 1099-NEC reports non-employee compensation to independent contractors. Independent contractors pay self-employment taxes, so any employer who pays an independent contractor does not withhold any pay for employment taxes. For other types of income such as rent or medical care payments, employers use the 1099-MISC.

The 1099-NEC form has sections for payer and payee identification information along with compensation. The primary form goes to the IRS, and payers send a copy to the payee. Similarly, the 1099-MISC form asks for the same identification. The form has several categories of miscellaneous income for the payer to file.


Features of Tax Form W2

The W2 tax form reports yearly wages and income an employer has withheld for employment taxes. Employers pay employment taxes for their employees to cover Social Security and Medicare contributions along with federal and state income taxes. So, the W2 reports the total amount of pay the employer took out of the employee’s pay in addition to their normal wages.

The form itself has sections for employer and employee identification. The other boxes are where employers indicate total income and how much income went towards Social Security, Medicare, and income taxes. The official W2 goes to the IRS, and employers send a copy to employees.


When To Use Each Tax Form 

Knowing the difference in taxes 1099 vs W2 is key to correctly filing each form. Employers file a W2 tax form for each employee on their payroll. Employers pay employment taxes for these employees and use the W2 to report. For any independent contractors an employer may pay, they use a 1099-NEC to report that payment. For other miscellaneous purchases over $600, the employer uses a 1099-MISC to report the miscellaneous income.


AMS Tax Software Makes Filing Taxes 1099 vs W2 Easy 

The AMS 1099/W2 Forms Filer generates all tax forms employers need for the tax season. You can easily complete each tax form with the menu-driven format. Once you enter the payer and payee information once, the software saves the information for the next time. Filing taxes 1099 vs W2 becomes straightforward with a quality software tool, like the one AMS offers.



Employers can easily add on other software modules for a more comprehensive software. You can access a free demo to try the software for yourself before deciding to invest.

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.