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Form W2 Vs W9: An Overview

Updated on January 27, 2024 - 10:30 AM by Admin, TaxBandits

When it comes to managing your workforce or engaging with contractors, understanding the distinctions between IRS forms is crucial. Form W-2 and Form W-9 are two essential documents that play distinct roles in reporting taxes. In this comprehensive guide, we'll be answering the difference between W-2 Form and Form W-9, clarifying their purposes, filing requirements, and the crucial distinctions between W-2 employees and W-9 contractors.

1. What is Form W-2?

Form W-2 is an annual IRS tax return statement used by employers to report each employee's earnings and tax withholding details, encompassing Federal Taxes, as well as the employee and employer shares of Social Security and Medicare taxes paid during the year.

2. What is Form W-9?

Form W-9 is used to request the taxpayer identification number from your contractor or vendor at the beginning of the work agreement. Form W-9 contains information like your vendor name, address, TIN, and any backup withholding information. This form is generally filled out by the vendor and should be submitted to the payer.

3. Form W2 vs W9: What's the difference?

Form W2 and W-9 are completely different forms used for different purposes. Here are the major differences between these forms

  • Purpose: Form W-2 and W-9

    Form W-2 generally summarizes employee's annual wages and the taxes withheld from their paychecks throughout the year. In contrast, Form W-9 is utilized to collect essential information from independent contractors or entities hired to perform services for an organization. The primary aim is to gather their personal information and Taxpayer Identification Number (TIN) for tax reporting purposes.

  • Who needs to file

    Employers are responsible for filing Form W-2 with the Social Security Administration (SSA) annually. Simultaneously, a copy of the Form W-2 must be distributed to each employee on the company's payroll. This includes individuals who are formally employed by the organization. On the other hand, Form W-9 is the responsibility of the independent contractor or entity that enters into a working arrangement with a company. Independent contractors don’t have to be individuals either – they can be whole companies that your organization hires to perform a service for them.

  • Deadline to file Form W-2 and W-9

    Employers must file Form W-2 annually with the SSA. Additionally, a copy of the Form W-2 must be furnished to each employee before January 31 of the following year. Unlike Form W-2, Form W-9 does not have a specific deadline for submission. Independent contractors are required to fill out and submit it at the time they are hired or before they begin performing services for the organization.

4. What is the Difference between a W-2 employee and a W-9 contractor?

The primary difference between a W-2 employee and a W-9 contractor lies in their employment status and how they are treated for tax and legal purposes:

W-2 Employee:

  • Employment Relationship: W-2 employees are considered formal employees of a company. They have an ongoing, often long-term relationship with the employer.
  • Payroll Taxes: Employers withhold and pay payroll taxes, such as Social Security and Medicare taxes, from the employee's wages. These taxes are shared between the employer and the employee.
  • Benefits: W-2 employees may be eligible for company benefits such as health insurance, retirement plans, and paid time off.
  • Tax Reporting: Employers provide W-2 employees with a Form W-2 at the end of the year, summarizing their earnings and tax withholdings for the year.
  • Labor Laws: W-2 employees are protected by various labor laws and regulations, including minimum wage laws, overtime pay, and workers' compensation.

W-9 Contractor

  • Independent Contractor Relationship: W-9 contractors, often referred to as independent contractors, are individuals or businesses hired on a temporary or project-specific basis. They are not considered
    regular employees.
  • Self-Employment Taxes: Independent contractors are responsible for paying their own self-employment taxes, which include Social Security and Medicare taxes. They are not subject to payroll tax withholding by the hiring company.
  • No Benefits: Typically, independent contractors do not receive employee benefits from the hiring company.
  • Tax Reporting: Hiring companies may issue Form 1099-NEC (or Form 1099-MISC, depending on the nature of the work) to independent contractors, reporting the total amount paid to them during the year. Independent contractors use this information for their own personal tax filings.
  • Labor Laws: Independent contractors are not protected by labor laws governing employees. They do not receive benefits like minimum wage, overtime pay, or workers' compensation from the hiring company.

5. How do you determine whether you need a W-2 or W-9?

The decision between a W-2 and a W-9 depends on the nature of your working relationship. If you are an employer and have individuals on your payroll who perform services as regular employees, you must provide them with a W-2 at the end of each year. When you hire independent contractors to perform specific services, you should request a W-9 form from them. Independent contractors are not part of your regular workforce but are engaged on a project or
service basis.

6. What is exempt from providing Form W-9?

Not everyone is required to complete a W-9 Form. Here are some exemptions:

  • If an individual is classified as a regular employee, receives regular wages through payroll, and is not considered an independent contractor, they are not required to complete Form W-9.
  • Independent contractors located outside of the United States and paid less than $600 a year by a single company are generally exempt from providing a W-9.
  • Individuals hired for household-related tasks like babysitting or yard work are typically classified as household employees, not independent contractors. They are not required to
    file Form W-9.

7. Why is Form W-9 required?

Form W-9 is required to collect essential tax information from contractors for a company's records. While the completed W-9 isn't filed, it's crucial for accurate reporting on Form 1099, which companies must send to the IRS and their contractors at the start of each tax year. In contrast, W-2 forms are used exclusively for full- and part-time employees, not contractors.

8. How can I file Form W-2 with TaxBandits?

Filing Form W-2 with TaxBandits is a straightforward and efficient process. To get started, you'll follow a few simple steps to complete your e-filing. TaxBandits offers a user-friendly platform that caters to your specific needs, whether you're filing at the Federal or States. Our system includes features such as TIN matching and internal audit checks, which ensure the accuracy of your submissions, reducing the likelihood of errors that could trigger IRS inquiries.

TaxBandits also simplifies bulk filing, making it easy to submit multiple W-2 forms simultaneously. You can choose the delivery method that suits you best, whether it's through traditional postal mail or the convenience of online distribution, ensuring that your recipient copies reach their intended destinations efficiently.

In addition to W-2 filing, TaxBandits offers a valuable W-9 manager tool. This feature allows you to request and manage W-9 forms all in one place, streamlining your vendor onboarding process. By centralizing this essential paperwork, TaxBandits simplifies the often complex task of collecting and organizing the necessary information from your contractors and vendors.

TaxBandits' fillable W-9 solution is to streamline the process for corporations to fill out and send a W-9 to their payers.

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