What Exactly is a W-2 Form?
The Internal Revenue Service can provide a Wage and Tax Statement on the W2 form. An employer must complete this kind of form for each employee paid at least $600 by a company during a given tax year to get payroll taxes assessed properly.
The total amount an employee was paid by your company in wages, tips, other forms of compensation and benefits, as well as the amount of federal, state, and local income tax, as well as Social Security and Medicare tax that was withheld, is recorded on a W-2 form.
Therefore, collecting payments and a possible paycheck for obvious purposes along the way is wise. You must submit it to the government as a record of compensation and taxes, and you must also provide it to employees so they can use it to help them complete their tax returns.
Even if an employee is no longer with your company, when tax returns are prepared, you must complete, submit, and issue a W-2 form if you paid them at least $600 in wages for a given tax year.
You can file and distribute forms electronically or by mail. W-2 forms can be generated, sanded, and sent automatically by several payroll providers, including Gusto and Justworks.
A 1099 form is a document that serves as an alternative to a W-2 for independent contractors. This form is a declaration you must fill out regarding the amount you paid a worker who was not an employee during the tax year and applies to all US states.
What is a W-9 Form?
The IRS Form W-9 requests a taxpayer identification number (TIN) and certification. When you hire an independent contractor for your company, they will fill out this form for you. This ensures you have all the necessary tax information to record how much you paid them at the end of the tax year.
A contractor’s name and, if applicable, business name, federal tax classification, address, and TIN, which can be either a Social Security number or an employer identification number, are all included on a W-9 form. Additionally, the form may consist of the contractor’s federal tax classification.
It would help if you had independent contractors fill out this form as soon as you hire them so that you have it for your records. However, the latest date you require it is January, the deadline for filing a 1099 form to record the contractor’s pay for the previous tax year.
The W-2 form, designed for employees, is the equivalent of the W-9 form. When new employees are hired, they will provide you with their TIN by filling out this form, which will also tell you how much tax to deduct from their paychecks.
Because independent contractors are responsible for reporting and paying their taxes, there is no information on tax withholding on a W-9.
What is a W-4 form?
Fill out a W-4 to have the appropriate federal income tax withheld from your paychecks. Whenever your tax withholding status or personal information changes, you should consider filing a new Form W-4. The IRS’ role for a w4 is to correctly calculate allowances and tax withholdings and offer its staff and dependents concise ways of assessing annual tax payments. In addition, you might receive a fat check from the IRS in your savings accounts after you told the IRS that you’d quit your job or switched jobs sooner than the IRS had anticipated. Filing for a W4 might pay dividends if you need the money quickly.
As a taxpayer, you will likely come across a W4 form if you frequently switch employment. To properly assess a business owner’s tax payments and withholding, the IRS office has to ask certain questions regarding changes in employees’ careers, which is why your old employer might ask you to fill this form out.
Who Needs a W-9 and Why?
W-9 forms are required for all US-based contractors, but employees are exempt. When you hire a contractor, you must have them fill out a W-9 form to record their tax information, which includes their name (or business name), address, and taxpayer identification number. You should keep a copy for your records so you can submit the 1099 on behalf of the contractor when tax season comes around.
When Should You Use a W-2?
At the end of each tax year, your company must compile and submit W-2 forms for all its employees. Typically, they are due by January 31 of each year for the previous tax year; however, your deadline may be different if you choose another tax year with the IRS. Before the deadline, you must not only deliver a copy to the employee but also file a copy with the Social Security Administration (SSA) and the state.
W2 employees offers numerous pros rather than cons
Employees who are committed to your company and are well-treated can bring significant financial benefits to your company. They will be committed to your company and go above and beyond in performance. Of course, there are also many excellent independent contractors, but the fact that you are just one of many customers is a common issue.
Provide a greater sense of continuity: Because employees are committed to remaining with your company in the long term, they can assist you in meeting the needs of your business at any given time. For example, if you need someone to switch focus or contribute to a project on short notice, you can rely on your employees to assist and support you in these endeavors. However, independent contractors frequently specialize in a specific field of endeavor.
Make time for the company’s owner — Running a small business requires taking on many responsibilities, and you may feel like you never get a break from your work. Having employees allows you to delegate specific tasks over time, taking them completely off your plate. Your focus can then shift to more strategic aspects of running the company.
Employers must provide new hires with training as part of the onboarding process for new employees. Following that, they should continue to receive training on a more regular basis; however, it is reasonable to assume that they are already familiar with the company’s policies and standards. Because independent contractors are not considered members of your onsite team, you can only sometimes rely on them to deliver work that meets your criteria.
Finally, it is impossible to say whether a 1099 contractor is always better than a W2 employee. Before deciding between a 1099 contractor and a W2 employee, consider the size of your company’s budget, the nature of the work being performed, and the level of control you want over the workflow and the result.
Even though independent contractors’ services may be more expensive than those of employees, their expertise can frequently result in a higher-quality product. However, when you hire an independent contractor, you relinquish control over how their work is completed and the time and location in which it occurs. Many small-business owners need that option. Furthermore, many small business owners see their companies as a large family; as a result, they see employees as a more natural fit for this model than independent contractors.
There are numerous factors to consider before hiring 1099 or W2 employees. Please see the chart below for more information. In addition, this section highlights some specific scenarios in which you might choose an independent contractor over an employee or vice versa: Choosing an independent contractor over an employee.
When can you expect to receive your W-2?
Although technology has changed the way W-2s are delivered, one thing has not changed: the deadline. Your employer has until January 31 to either mail or hand offer your form to you.
However, if you have yet to receive it by February 15 and want to correct the situation, the IRS recommends that you first contact your employer. Then, if that does not produce the desired results, or if the employer is no longer in business, you can get the Internal Revenue Service and request the form.
Even though the Internal Revenue Service (IRS) requires that all forms be mailed or delivered by January 31, some employers handle everything themselves. Check your e-mail or the paperwork you received at the start of the onboarding process for instructions on accessing your form.
In addition, your tax forms may be saved if you frequently log into a payroll system. Of course, your employer should have informed you of this, but at the very least, you’ll be able to print a copy of your form and file your taxes on time.
If You Didn't Receive a W-2 Form
Even if you ask, an employer may refuse to provide you with a W-2 form despite your best efforts. You must still file your taxes, and even if you do not receive a form, You may have reported your earnings to the IRS, so be accurate. Even if you don’t receive a form, you must still file your taxes. Then, using your pay stubs as a guide, add up all your earnings and deductions for the year and provide the most accurate estimate you can. If you do not receive a W-2, you must:
Employers must enter this information on Form 4852, which replaces Form W-2, Wage, and Tax Statement. This will be used in place of your W-2 form when completing and submitting your Form 1040. If your form arrives after the fact and you discover that your calculations were incorrect, you can correct the error by filing an amended tax return using Form 1040X. The Internal Revenue Service would allow tax returns for 2019 to be amended online if the return was e-filed initially.
If you require tax information from a previous year, you can submit Form 4506-T to the Internal Revenue Service (IRS) to obtain transcripts of older W-2 forms.
Another option is to request copies of your W-2 form from the Social Security Administration. If your request has nothing to do with Social Security, you can obtain copies of W-2 forms dating back to 1978 for a fee of $90 from the Social Security Administration (SSA). The most recent year for which documents are available is 2018.
When Is a W-9 Form Not Necessary?
A W-9 is only required of a payer if they pay you $600 or more. However, the first time your client hires you for a job, he may need to learn how much he’ll pay you. For example, if you do graphic design work for a client and all he initially wants is a logo at your going rate of $60 per hour, you may find yourself in a bind.
Even if he has yet to decide whether or not he will use you for other projects, he may ask you to fill out a W-9 form as part of his onboarding procedure.
However, most customers will only have you complete the paperwork once they are confident you will successfully meet their needs. Even if you do not receive a 1099, you are still required to report any income you earn and pay taxes on it if you reach the end of the year and still need to complete a W-9. This does not relieve you of your obligation in any way.
Both the W-9 and 1099 are intended to be issued by businesses, not individuals. You are not required to claim a babysitter even if you use them regularly, such as when you leave your children in their care so that you can go out to eat.
The same logic applies to other sorts of independent contractors that provide services directly for you, such as landscapers and housekeepers. This does not relieve the workers of their obligation to pay taxes on the amount you pay them; instead, it reduces the contracting party’s obligation to report the amounts paid to the Internal Revenue Service.
How to Complete the W-9 Form Correctly
If you are an independent contractor, you can fill out Form W-9 by following these steps:
In box 1, write down the name on your tax returns, which is likely the same name on your legal documents. Unless your middle name appears on your tax returns, leave it out.
If you have a business name or a name for a disregarded entity in addition to your legal name, write that name in box 2. To put it another way, if you are a sole proprietor who does business under a different name, you should note that name in box 2, as it applies to you.
In box 3, check the box that corresponds to the type of business you run, which could be an individual/sole proprietor or single-member LLC, a C corporation, an S corporation, a partnership, a trust/estate, a limited liability company, or any other type. For example, suppose you are an independent contractor. In that case, you are either an individual/sole proprietor or a single-member LLC unless you have completed the extensive paperwork required to register your business name as a C corporation or S corporation. You are an individual/sole proprietor if you have completed this paperwork.
In box 4, you will specify your exclusions. In almost all cases, this box can be left blank. Exceptions to this rule are infrequent, including corporations exempt from backup withholding and payees exempt from reporting under the Foreign Account Tax Compliance Act. Both of these scenarios are almost unheard of among freelancers.
Please enter your address in boxes 5 and 6 using the format provided. In addition, please use the address that appears on your tax return.
To the right of boxes 5 and 6, please write the name and address of the person or company who asked you to complete a W-9 form for them. You are not required to complete this section, but doing so may assist you in keeping track of all customers to whom you have provided a W-9.
Box 7, which says “List account number(s) here (optional),” can usually be left blank unless the person requesting your W-9 specifically requests that you enter bank account information on your form. In that case, you must fill out that section of the state.
After you have completed these boxes, you will proceed to Part I. If you are a sole proprietor or a freelancer, you must provide your Social Security number in this section. If you represent a company, you must provide your employer identification number. If your company is so new that it does not yet have an EIN, you should write “applied for” next to it.
Continue to Part II, where you will read and confirm the four provided statements. For example, statement two refers to backup withholding, from which you are exempt unless the Internal Revenue Service contacts you to inform you otherwise. You can also disregard statement four if you still need to complete box 4. If you can verify that each of the four assertions is correct, sign and date the form where indicated.
Please send the completed form to the organization that asked you to fill it out.
If your business has tax problems
When you’re self-employed, filing for taxes and keeping your finances up-to-date can be difficult. Taxpayers in self-employment are often subject to significant penalties because of mistakes in their tax requirements, missing deadlines, or not paying fees accordingly. We provide the basics for filing forms, like form w9.
Debt consolidation is possible, but the IRS will need information about your business lines, and contact can be difficult. In addition, what kind of debt consolidation your eligible for depends on your credit score, current loan on your house (mortgage), car or other loans, and capital gains or losses from your business.
Moreover, the IRS will look at the status of your household and ask: How many children do you have, are you married, and what kind of joint expenses you have to pay. We can help you get the best solution for your tax situation. We help clients find middle-ground with the IRS and gain a fresh start for their business. Interested in getting your tax debt relief handled? See If you qualify for the IRS Fresh Start Program.