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We are pleased to announce that all businesses and individuals can now file W-2 forms with Zenwork. If you previously received a letter from the Social Security Administration (SSA) regarding electronic wage report submissions, please note that the issue has been fully resolved. Our systems are fully operational, and we are processing W-2 and W-2C filings without any disruptions.
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Home » 1099 vs W2 Forms- What Employers Need to Know
Wages and other payments to employees are reported on Form W-2, while payments to independent contractors are reported on Form 1099-NEC. Each business must classify its workers as employees or independent contractors to file the appropriate form.
In 2019, Uber got hit with $650 Million in penalties for misclassifying their drivers as independent contractors rather than employees. Their mistake? Issuing 1099-NEC forms instead of the W-2s: the primary point of distinction between the two types of workers. The IRS is very clear about these regulatory practices, and if you don’t follow the rules, you could end up paying some hefty fines for noncompliance.
Now that you have classified your workers, it’s time to understand the difference between 1099 forms and W-2 forms.
1099 vs W2 Forms
Form W-2 is a Wage and Tax statement, and it is used to report an employee’s wages and taxes. It is issued to the employee and the Social Security Administration. The employer issues the form reporting information such as the employee’s social security number, income, and the amount of taxes that were withheld from their paycheck.
Form 1099-NEC is a newer addition to the 1099 series, and it stands for Nonemployee Compensation. This form is used to report payments made to contractors and other nonemployee workers. The payer issues the form, reporting information such as the recipient’s name, address, and social security number. 1099-NEC is used for reporting the compensations paid to the independent worker in exchange for their services if the gross payment is $600 or higher.
It’s interesting that the main similarity between these two forms is that they are both used for reporting payments issued to workers.
If you accidentally use the wrong form, the IRS will send you a notice, asking you to file the forms with the correct information. But this isn’t the case all the time.
When in doubt, you can always use Tax1099’s AI Assist for help with any questions about filing your tax forms.
eFile 1099-NEC Online
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