Wages and other payments to employees are reported on\u00a0Form 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.<\/p>\n
In 2019,\u00a0Uber 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\u2019t follow the rules, you could end up paying some hefty fines for noncompliance.<\/p>\n<\/div>\n
\nDon\u2019t Let Worker Misclassification Lead to IRS Fines<\/h3>\n
\nClassify Your Workers
\n<\/a><\/div>\n<\/div>\n<\/blockquote>\nWhat\u2019s the Difference Between 1099 and W-2 Forms?<\/h2>\n
Now that you have classified your workers, it’s time to understand the difference between 1099 forms and W-2 forms.<\/p>\n
1099 vs W2 Forms<\/strong><\/p>\n
Form W-2<\/a> is a Wage and Tax statement, and it is used to report an employee\u2019s 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\u2019s social security number, income, and the amount of taxes that were withheld from their paycheck.<\/p>\n
Form 1099-NEC<\/a> 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\u2019s 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.<\/p>\n
Form 1099-NEC vs Form W-2<\/h4>\n
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