Both Forms W-2 and 1099-MISC are annual wage reports required to be sent to workers and the SSA or IRS by employers for tax reporting purposes. However, the form used to report those wages will depend on the classification of the worker, specifically whether they are an employee or non-employee.
Simply put, Form W-2 is for employees and Form 1099-MISC is for non-employees.
The IRS defines employees as “anyone who performs services for you is your employee if you can control what will be done and how it will be done.“
Non-employees are defined as a person or business who is not employed by your company, such as independent contractors, freelancers, or outsourcing companies. This includes persons such as cleaning services, IT support, or maintenance services.
Form W-2 is used to report total income and withholding taxes for employees. Copies of these forms are due to the employees by no later than January 31st. All Forms W-2 should also be sent to the SSA along with summary Form W-3.
For more information, check out our Step-by-Step Guide for Preparing Form W-2.
Form 1099-MISC is used to report total wages paid to non-employees. Withholding taxes are generally not reported on Form 1099-MISC except under certain circumstances where backup withholding may apply. Form 1099-MISC is also only required for payments of $600 or more to the non-employee during the reporting year.
Forms 1099-MISC are due to their recipients by January 31. All Forms 1099-MISC should also be sent to the IRS along with summary Form 1096.
For more information, check out our Step-by-Step Guide for Preparing Form 1099-MISC.