Find a Job You Really Want In
When hiring in today’s evolving job market, navigating the array of official forms can be challenging. Among these, the W-9 and W-2 forms are essential, yet many people still confuse their distinct purposes. With the rise of remote work and freelance opportunities, understanding these forms has become even more crucial.
In this updated article, we’ll clarify the roles of both IRS forms and highlight their similarities and differences relevant to the current landscape.
Key Takeaway:
| W-9 | W-2 |
|---|---|
| A W-9 is an IRS form that independent contractors fill out. | A W-2 is a form employers fill out for their employees. |
| W-9s ask for contractors’ tax identification numbers (TIN). | W-2s record how much an employee was paid and how much was withheld from their paycheck for taxes. |
| W-9s are necessary for filling out 1099 forms. | W-2s are necessary for filing taxes. |
| Companies don’t have to file W-9s with the IRS but do have to send them to contractors. | Companies must file W-2s with the IRS and send them to their employees. |
| W-9s are typically filled out when an independent contractor is hired. | W-2s are filled out at the end of every tax year. |
What Is a W-9?
IRS Form W-9 requests an independent contractor’s taxpayer identification number (TIN) and certification. Here’s a detailed look at W-9s.
-
A W-9 is an IRS form that independent contractors fill out. When your company hires an independent contractor or freelancer, it’s essential to have them complete a W-9 to keep on file. This form is pivotal for maintaining accurate records, especially in today’s gig economy.
Independent contractors can also be businesses that your organization hires for services. Furthermore, many companies need W-9s for their vendors and anyone receiving compensation outside of employment.
-
W-9s require contractors’ tax identification numbers (TIN). This could be the contractor’s Social Security Number if they are a sole proprietor or their employer identification number (EIN) if they employ others.
The form also requests the contractor’s federal tax classification, name, address, and business name, if applicable. Many independent contractors operate under their names, which is acceptable.
-
W-9s are necessary for filling out 1099 forms. When hiring an independent contractor, you must complete a 1099 form each January to report how much you paid the contractor in the previous year. This form is sent to both the IRS and the contractor.
-
W-9s do not have to be filed with the IRS. These forms are for internal company records to facilitate accurate 1099 reporting during tax season.
-
W-9s are typically filled out when an independent contractor is hired. While it’s not legally required, it’s advisable for companies to collect W-9s at the time of contract signing. This ensures you have the necessary information ready for 1099 filing, which must be completed by January.
What Is a W-2?
IRS Form W-2, also known as a Wage and Tax Statement, is a form that employers complete for their employees, detailing how much they were paid during the year and the taxes withheld from their paychecks. Here’s 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 is required to complete a W-2 form for that employee. This obligation holds even if the employee is no longer with the company. However, W-2s are not used for independent contractors.
-
W-2s record how much an employee was paid and how much was withheld for taxes. A W-2 encompasses all compensation received throughout the tax year, including salary, tips, and benefits, along with the amounts withheld for state, federal, and local income taxes, Social Security, and Medicare.
-
W-2s are necessary for filing taxes. Not only do companies need W-2s for their tax filings, but employees also rely on them when submitting their tax returns, as these forms contain vital income information.
-
Companies must file W-2s with the IRS and provide copies to their employees. W-2s serve as a resource for employees when filing taxes and must be submitted to the Social Security Administration and, if required, the state.
-
W-2s are completed at the end of every tax year. The typical deadline for W-2 submission is January 31, allowing companies sufficient time to prepare their employees’ W-2 information for the previous year. Companies with fiscal years differing from the calendar year may have different deadlines, but W-2s are generally due about a month after the end of their tax year.
W-9 Vs. W-2 FAQ
-
Who is exempt from providing a W-9?
Contractors based outside the U.S. or paid less than $600 a year by a single company are exempt from providing a W-9.
Instead of a W-9, a non-U.S. independent contractor will complete Form W-8BEN if they are an individual or W-8BEN-E if they operate as an LLC or other business entity.
If you pay an independent contractor less than $600 in a tax year, you do not need to request a W-9 or file a 1099. However, it’s important to maintain accurate records of payments to ensure compliance with these thresholds.
To be safe, it’s a good practice to request a W-9 from every contractor, regardless of anticipated earnings. This way, if payments exceed $600, you’ll have their information ready for timely 1099 filing.
-
A W-9 is for a 1099 form. W-9 forms collect essential information from independent contractors, including their taxpayer identification number (TIN), name, and address, enabling accurate completion of 1099 forms.
While W-9s are for internal records and do not need to be filed, companies must file 1099s with the IRS and provide them to contractors at the beginning of each tax year.
Conversely, companies complete and file W-2 forms for their full- and part-time employees each tax year, but do not do this for contractors.
-
A W-9 remains valid until the information on the form changes. There is no expiration date on a W-9 form, meaning it stays valid as long as the details are correct. While companies aren’t required to update W-9s annually, it’s wise to do so to ensure accuracy.
As independent contractors and companies often change names, addresses, and other crucial information, requesting new W-9 forms each year is advisable.
Additionally, the IRS may update the form, so companies should stay informed and request updated forms as necessary.
Author
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.
