The main W-2 W-9 difference is that employers file the tax documents for different categories of workers. Employers file Form W-2 for employees, and contracted workers fill out and provide employers with Form W-9. Knowing when to provide your workers with essential documents matters regardless of the time of year.
Both tax forms help keep businesses and individuals compliant with the Social Security Administration/Internal Revenue Service during tax season. The forms also provide a record for your company if the SSA/IRS notices any errors or discrepancies. This article will provide employers with information regarding when and why they need to distribute the forms to specific workers.
When to Use Form W-2
Employers must send a Form W-2 to anyone classified as a company employee. One W-2 W-9 difference is a company puts W-9 employees on payroll. Companies list all of their employees on their tax documents as well. Companies either pay workers on an hourly basis or with a fixed salary. Make sure when you hire a worker that you review the IRS’ employee definition to correctly classify them.
Employers must send W-2 forms at the start of the tax season or the new calendar year. The SSA requires that employers put the W-2 forms in the mail by January 31 for the year prior’s earnings. Keep your records of all company W-2 forms for at least four years.
What is a W-9 Form?
Freelance workers or independent contractors must fill out a W-9 form at the start of a contract. The employer uses the document with the individual’s address and Social Security Number to report income earned during the contract tax season. However, this income is reported on a 1099 rather than a W-2. In most cases, a company will use a 1099-NEC.
Employers should consider whether the company will pay a contractor more than $600 during their contract when understanding critical W-2 W-9 differences. If so, you must distribute a 1099 form during the relevant tax period. However, there are multiple circumstances when you should not give a worker a Form W-9. You do not need to distribute W-9 forms for certain household jobs, like babysitting.
Common W-2 W-9 Errors
All tax documentation forms come with their own set of guidelines and requirements. Make sure that your company adheres to them to avoid the SSA/IRS issuing any penalties. One error that the SSA/IRS will penalize employers for is if your company submits a form with an incorrect or missing Employer Identification Number. For W-9 forms, double check to ensure that contractors have signed the form correctly. This is a common mistake that you’ll want to avoid. The IRS does not require contractors to sign all W-9 forms. However, providing a signature minimizes any avoidable complications.
How AMS Can Help During Tax Season
The Advanced Micro Solutions tax software can provide users with tools to distribute and collect the information needed on W-9 forms. We also offer additional wage and tax software tools. Our W-2 and 1099 forms filer software keeps users organized so that there is no confusion with the W-2 W-9 difference. 1099-etc. also offers payer backup and restore options with our system.