W-2 vs C2C paperwork have notable differences. Employers provide Form W-2, the Wage and Tax Statement, to employees each year. Employers must send the statement to employees and the Internal Revenue Service. A Corporation-to-Corporation (C2C) contract works differently than a W-2. The contract enables two corporations to interact with each other when making new hiring choices. Either a recruiter or an employer will handle the associated taxes.
Before you hire anyone for your company, do some research. Make sure that you understand all of the differences between W-2 and C2C.
What is Form W-2?
Employers distribute Form W-2 to their employees each year by Jan. 31. Between W-2 vs C2C, a W-2 form shows an employee’s earned income. It also details retirement, health insurance, and sick leave, along with taxes payable by an employee. A W-2 form is for a fixed period of time.
What is C2C?
If your company enters a Corp-to-Corp contract, you will establish an agreement with another business. Organizations prefer a C2C working arrangement when they want to recruit people briefly under a contract. It does not mean that an employer works for more than one agent or company. When organizations enter a C2C agreement, they often strive to avoid focusing on employee retention.
Whoever handles the taxes does not deduct them from the earned salary or any fees. Most employers will calculate and file taxes each quarter. If your company chooses not to hire an accountant for W-2 vs C2C taxes, invest in a tax software to help streamline the process.
Pros and Cons of W-2 Employees
Employers reap certain benefits when they hire W-2 employees. W-2 workers bring stability to a company. Once they sign your company’s contract, you do not need to worry about losing them to other jobs. The employees will have an opportunity to adapt to the company culture. You will also find some cons with W-2 workers. If an employee does not work well, it is not as easy as finding a new independent contractor. There is also the added cost of paying them benefits that you do not pay to contract workers.
Pros and Cons of C2C
Many employers understand that using C2C arrangements trims employment taxes. Another benefit is that it cuts employment concerns. This means the other party in your company’s C2C relationship will have a harder time filing a lawsuit against your business if the relationship sours. C2C also lessens the likelihood of the IRS auditing employers for misclassifications. However, one major drawback as an employer is the payment process takes longer to complete. In some cases, payments may not clear for a month.
Why Use AMS
Tax season creates a tremendous amount of stress regardless of your business arrangement. Investing in tax software can help you manage all of the paperwork and minimize that stress. Our software generated forms allow users to avoid aligning forms. For W-2 vs C2C scenarios, users can simply print the form on blank paper and meet your deadlines.