W-2 and 1099 Forms: What Employers Need to Know
The difference between a W-2 and a 1099 sounds simple until you’re the one filing them for 50 people in December. Here’s what actually matters.
What is a W-2?
A W-2 is the tax form employers send to every employee, not contractor, at year-end, showing total wages paid and taxes withheld throughout the year. Any employee paid wages has to receive one, regardless of hours worked. It includes wages, federal, state, and local tax withheld, Social Security and Medicare contributions, and benefits deductions. The standard deadline is January 31: employees must have their W-2 in hand by then.
What is a 1099 form?
A 1099 form reports payments made to someone who isn’t an employee, most commonly an independent contractor, freelancer, or vendor. The version employers deal with most is the 1099-NEC, for nonemployee compensation. It’s required once a business pays a contractor $600 or more in a year, and it’s due to the recipient by the same January 31 deadline as a W-2.
What is a 1099 employee?
“1099 employee” is a common phrase, but it’s technically a contradiction. Someone who receives a 1099 is an independent contractor, not an employee. Contractors set their own hours, use their own tools, and are responsible for their own tax withholding. Employees who receive a W-2 have taxes withheld automatically and are covered by wage and hour laws that don’t apply to contractors. Getting this classification wrong has real consequences: back taxes, penalties, and potential Department of Labor scrutiny.
W-2 vs. W-4: what’s the difference?
A W-4 is the form an employee fills out when they’re hired, or when their situation changes, to tell their employer how much tax to withhold. A W-2 is the form the employer sends back at year-end showing what was actually withheld. One sets expectations, the other reports results.
How employees get their W-2
Employers are required to make W-2s available by January 31, either by mail, secure portal, or both. A self-service portal where employees can pull their own W-2 on demand also cuts down “where’s my W-2” support tickets significantly, which is part of what Netchex’s Employee Self-Service is built to handle.
W-2 vs. 1099-NEC, side by side
| W-2 | 1099-NEC | |
|---|---|---|
| Who receives it | Employees | Independent contractors, freelancers, vendors |
| Tax withholding | Employer withholds throughout the year | None, contractor handles their own |
| Threshold to issue | Any wages paid | $600 or more paid in the year |
| Deadline to recipient | January 31 | January 31 |
| Employer’s ongoing obligations | Payroll tax filings, unemployment insurance, benefits eligibility | None beyond the 1099 itself |
Common mistakes employers make with these forms
For a closer look at the specific errors that show up most often on W-2s and how to fix them, see Form W-2 Tips for HR Admins: Common Mistakes and Fixes.
This page is general information, not tax or legal advice. Confirm current-year deadlines and thresholds with the IRS or your tax advisor before relying on them for filing decisions.
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Common questions
What is a 1099 form used for?
A 1099 form reports payments made to someone who isn’t an employee, most often an independent contractor. The most common version, 1099-NEC, is required whenever a business pays a contractor $600 or more in a year.
What is the difference between a W-2 and a 1099 employee?
There’s no such thing as a “1099 employee” in a strict sense. A W-2 goes to an employee whose taxes are withheld by the employer. A 1099 goes to an independent contractor who handles their own taxes. The distinction matters for legal classification, not just paperwork.
What is a W-2 employee?
A W-2 employee is someone on payroll whose employer withholds federal, state, and local taxes automatically and reports total wages and withholding on a W-2 form at year-end.
When do employees need their W-2?
By January 31 of the following year, whether delivered by mail or through a self-service portal.
What’s the difference between a W-2 and a W-4?
A W-4 is filled out by the employee at hire (or when their situation changes) to set tax withholding. A W-2 is issued by the employer at year-end to report what was actually withheld.
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