Form 1099 vs. Form W-2 — What's the Difference?

Navigating worker classification is crucial for compliance. The core difference lies in the employment relationship:

Form W-2: For Employees

• You withhold income, Social Security, and Medicare taxes from their wages.
• You pay a portion of Social Security and Medicare taxes.
• You may provide benefits (health insurance, retirement).
• Used for common-law employees under your direction and control.

Form 1099-NEC: For Independent Contractors

• You do not withhold any taxes from their pay.
• The contractor is responsible for all self-employment taxes.
• Typically, no benefits are provided.
• Used for non-employees who control how and when the work is done.

Key Takeaway: Misclassification can lead to significant IRS penalties and back taxes. When in doubt, consult the IRS guidelines or a professional to ensure proper filing.

Need help determining worker status or filing these forms? Prestivo Tax LLC ensures accurate classification and seamless processing.