Should I Do 1099 or W2, Answered

As tax season arrives, you are likely asking yourself, “Should I do 1099 or W2 for my employees?” Employers face this question frequently and sometimes have a hard time remembering which form is appropriate for which type of employee. The IRS has consequences for those who misclassify workers. To protect yourself from potential consequences, read this guide. We’ll help you understand the difference between the two forms. If you hire a variety of employees, your tax software should have all the forms you need. Advanced Micro Solutions software supports all the tax forms you need to successfully complete taxes.



What Are 1099s for?

The 1099 tax form is for independent contractors and other freelance workers who you pay but do not employ. The IRS defines an independent contractor as a self-employed worker who does not have an employer. Since they do not have an employer, independent contractors pay their own employment taxes.

The 1099 form reports various forms of income, such as rent, payments to attorneys, and health care payments over $600 or over $10 in royalties. For other non-employee income, employers should use the 1099-NEC.


What are W2s for?

The W2 tax form is for employees working for an employer. Employers withhold a certain amount of pay from their employees to pay payroll taxes for programs like Social Security and Medicare. For any employee to which they pay more than $600 and withhold income, employers complete a W2 form for year-end taxes for those employees. The form has sections for each type of withheld income for employers to report both to the IRS and to the employee.


Knowing When to Use 1099 or W2

So, should I do 1099 or W2? Employers first need to distinguish their workers as employees or independent contractors. Employees differ from independent contractors in a couple ways. The IRS clarifies that employers can direct the work of their employees at any point while employers can only control the result of the work of an independent contractor.

Another main difference is how an employer pays each type of worker. Employers withhold some income from their employees to contribute to payroll taxes. However, employers do not withhold any pay from independent contractors, who pay their own employment taxes. Keep these criteria in mind when you ask, “Should I do 1099 or W2?” when you go to file for your workers. The IRS has penalties for misclassifying employees, so make sure you review the information carefully.


AMS Software Can Help You File 1099s and W2s 

No matter your answer to “Should I do 1099 or W2?” you should have a quality tax filing software like the AMS 1099/W2 Forms Filer to complete both forms. Employers commonly employ both employees and independent contractors. The AMS forms filer supports up to 99,999 recipients and employee files so that you can keep each worker’s information and classification organized. AMS software makes year-end filing simple and easy to accomplish for employers tackling tax reporting. Try a free demo of AMS products to see how a software tool can improve your payroll operations.


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.