W-9 Vs. W-2: What’s The Difference?

When it comes to hiring people, there is no shortage of official forms you have to fill out. Two of these are W-9s and W-2s, and there is often a lot of confusion surrounding the differences between them.

In this article, we’ll go over both of these IRS forms and what their similarities and differences are.

Key Takeaway:

What Is a W-9?

IRS Form W-9 is a form that requests an independent contractor’s taxpayer identification number (TIN) and certification. Here is some more information about W-9s.

• A W-9 is an IRS form that independent contractors fill out. When your company hires an independent contractor or freelancer to complete a job for you, you’ll need them to fill out a W-9 for you to keep on file.

  Independent contractors don’t have to be individuals either – they can be whole companies that your organization hires to perform a service for them. In addition, many companies have to have W-9s for their vendors and any other individuals who receive compensation from the company without being an employee.

• W-9s ask for contractors’ tax identification numbers (TIN). This number can be the contractor’s Social Security Number if they’re a sole proprietor or their employer identification number (EIN) if they hire employees.

  The W-9 will also ask for the contractor’s federal tax classification, address, name, and business name if they have a separate one (many independent contractors use their own names, which is perfectly legal).

• W-9s are necessary for filling out 1099 forms. When you hire an independent contractor, you have to fill out a 1099 form every January stating how much you paid the contractor the previous year.

  This form will go to both the IRS and the independent contractor.

• Companies don’t have to file W-9s with the IRS. W-9s are for the company’s records so that it can fill out and file a 1099 form at tax time.

• W-9s are filled out at the time an independent contractor is hired. This isn’t a legal requirement, but it’s a good practice for companies to have their independent contractors fill out a W-9 when they’re signing their contracts. This way, you have it all ready to go when you’re filing their 1099.

  The reality, though, is that you just have to have them fill it out by January, which is when you have to file a 1099 form.

What Is a W-2?

An IRS Form W-2 is also called a Wage and Tax Statement, and it’s a form employers fill out for employees that records how much they were paid during the year and how much money was withheld from their paychecks for taxes. Here is some more information about W-2s:

• A W-2 is a form employers fill out for their employees. If a company pays a full- or part-time employee at least $600 in a tax year, it has to fill out a W-2 form for that employee. Even if an employee no longer works for them, they still have to fill it out. Companies do not file W-2s for independent contractors, however.

• W-2s record how much an employee was paid and how much was withheld from their paycheck for taxes. A W-2 covers all of the compensation an employee receives throughout the whole tax year, including salary, tips, benefits, etc.

  It also records how much was withheld from their paychecks for state, federal, and local income tax, Social Security, and Medicare.

• W-2s are necessary for filing taxes. Not only do companies have to use W-2s to file their own taxes, but employees have to use them as well. When employees file for their tax returns, they have to submit their W-2, as all of the information they need concerning their income from your organization is on that form.

• Companies have to file W-2s with the IRS and send them to their employees. W-2s aren’t just a helpful document for employees to be able to file their tax returns; companies have to actually submit them to the Social Security Administration and, if required, the state.

• W-2s are filled out at the end of every tax year. Typically, the due date for W-2s is January 31, as this gives companies enough time to fill out all of their employees’ W-2 information for the previous year.

  However, some companies elect tax years that are different from the calendar year, which means they have different due dates. The W-2s are still usually due about one month after the end of their tax year, though.

W-9 Vs. W-2 FAQ

1. Who is exempt from providing a W-9?

   Contractors who are based outside the U.S. or who are paid less than $600 a year by a single company are exempt from providing a W-9.

   Instead of a W-9, an independent contractor that is based outside of the U.S. will fill out Form W-8BEN if they’re an individual or W-8BEN-E if they’re an LLC or other business entity.

   In addition, if you pay an independent contractor less than $600 in a tax year, you don’t have to ask them for a W-9 or file 1099. However, you’ll need to make sure your company is keeping good records of how much you’re paying contractors throughout the year to make sure you meet these criteria.

   Just to be safe, it’s a good practice to request a W-9 from every contractor you employ, whether you’re planning to pay them more than $600 or not. This way, if you do end up paying them more than that, you’ll have all their information ready to go when you file 1099s and won’t be scrambling at the last minute.

2. Is W-9 for 1099 or W-2?

   A W-9 is for a 1099 form. W-9 forms request independent contractors for their taxpayer identification number (TIN), name, address, and other important information so that the company hiring them can accurately fill out a 1099 form for them.

   While W-9s are for companies’ own records, so they don’t have to file them, they do have to file 1099s with the IRS and send them to their contractors at the beginning of every tax year.

   On the other hand, companies fill out and file W-2 forms for their full- and part-time employees each tax year. They don’t do this for contractors, however.

3. How long is a W-9 good for?

   A W-9 is good until the information on the form is incorrect. There is no expiration date on a W-9 form, which means it’s valid as long as it’s correct. This means that while companies don’t necessarily have to get updated W-9 forms every year, it’s often a good practice to do so.

   Independent contractors and companies change addresses, names, and other important information regularly, so it’s a good idea to ask for new W-9 forms annually.

   In addition, the IRS may sometimes update the form by adding or removing required information, so companies should keep an eye on this and request updated forms as needed.

Author

Abby McCain

Abby is a writer who is passionate about the power of story. Whether it’s communicating complicated topics in a clear way or helping readers connect with another person or place from the comfort of their couch. Abby attended Oral Roberts University in Tulsa, Oklahoma, where she earned a degree in writing with concentrations in journalism and business.