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Both W-2 and W-9 forms are tax forms for workers in any kind of business. But each form has a distinct purpose and they’re relevant for different kinds of workers. As a business owner, you have to know who each form is for and when to use them. In this guide, we’ll explain the difference between W-9 vs. W-2 forms, who uses each and when to file them.
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What Is a W-2?
The IRS Form W-2 is an employee’s Wage and Tax Statement. An employer fills out this form for each employee paid at least $600 in a tax year.
A W-2 form records how much an employee was paid in wages, tips, other compensation and benefits from your business as well as the amount of federal, state and local income tax, and Social Security and Medicare tax withheld. You file it with the government as a record of compensation and taxes, and you distribute it to employees to help them fill out their tax returns.
You have to fill out, file and distribute a W-2 form for every employee you paid at least $600 in a given tax year, even if they no longer work for your business at the time you’re filing.
You can file and distribute forms electronically or mail paper forms. Many payroll services, such as Gusto and Justworks generate, file and distribute W-2 forms automatically.
The counterpart to a W-2 for independent contractors is a 1099 form. You fill this out as a statement of how much you paid a nonemployee worker for a tax year.
What Is a W-9?
The IRS Form W-9 is a request for taxpayer identification number (TIN) and certification. An independent contractor fills out this form when you hire them to work for your business, so you have the tax information you need to record how much you paid them at the end of the tax year.
A W-9 form includes a contractor’s name and, if applicable, business name as well as their federal tax classification, address and TIN, which can be a Social Security number or employer identification number (EIN).
You should have independent contractors fill out this form as soon as you hire them to make sure you have it for your records, but the latest you need it is by January when you have to file a 1099 form to record the contractor’s pay for the previous tax year.
The counterpart to a W-9 for employees is a W-2 form. New employees fill this out upon hiring to give you their TIN and let you know how much to withhold from their paychecks in taxes.
A W-9 doesn’t include any tax withholding information because independent contractors are responsible for filing and paying their own taxes.
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W-2 vs. W-9: Key Differences
The key differences between W-2 and W-9 forms are:
- Who completes each form
- When to use each form
In summary, a W-2 is completed by employers to summarize employee earnings. A W-9 is completed by independent contractors to record their TIN and work status for the employer and tax authorities.
Who a W-2 Is For
A W-2 form is used for employees but not contractors. As an employer, you fill out this form each January for every part-time and full-time employee who worked for any amount of time for your business during the previous tax year and was paid at least $600. You file a copy with the Social Security Administration (SSA) as a record of earnings and tax payments and send a copy to employees to give them the information they need to file their tax returns for the year. Additionally, it should also be filed with the state, if required by your state.
Who a W-9 Is For
A W-9 form is used for United States-based contractors but not employees. A contractor fills out a W-9 form when you hire them to record their tax information—name (or business name), address and TIN. You keep a copy for your records, so you can file a 1099 for the contractor at tax time.
When To Use a W-2
Your business should fill out and file W-2s for all employees at the end of each tax year. Typically, they’re due by Jan. 31 each year for the previous tax year, but your deadline might vary if you elected a different tax year with the IRS. You have to both file a copy with the SSA and the state (if required) and send a copy to the employee by the deadline.
When To Use a W-9
You should have each U.S.-based contractor fill out a W-9 as part of their onboarding paperwork, generally due to your accounting department before they sign a contract and begin work with the company. You don’t have to file a W-9 with the government. Keep it for your records so you have the information you need to file a 1099 for the contractor in January for tax season.
Bottom Line
W-9 and W-2 forms are vital tax forms for any business hiring workers. A W-9 is for newly hired independent contractors and gives the business the tax information you need to file a wage statement at the end of the tax year. A W-2 is a wage and tax statement for employees that the business fills out and files with the government at the end of each tax year.
Frequently Asked Questions (FAQs)
Does a worker have to pay taxes on a W-9?
A W-9 isn’t filed with taxes. Instead, it’s a record of taxpayer identification for an employer. It doesn’t contain any information for a contractor that’s useful at tax time. Contractors then receive a 1099 form at the end of each tax year. That form includes information about how much the contractor was paid by a business during the tax year, and they use this information to determine their taxable income.
What is a W-9 employee?
A W-9 worker, more commonly called a 1099 worker, is a self-employed person who works as an independent contractor with a business. The term comes from the tax forms used for these workers—the contractor fills out a W-9 to give their TIN to the business upon hiring, and the business files a 1099 form to record the contractor’s income at the end of each tax year. A 1099 employee is responsible for paying their own taxes, so businesses don’t withhold taxes from their paychecks.
Who is exempt from providing a W-9?
All U.S.-based independent contractors to whom your business pays at least $600 in a tax year are required to provide a W-9. That includes contractors who work under a business entity formed in the U.S., such as limited liability company (LLC). Contractors outside the U.S. instead fill out Form W-8BEN (for individuals) or W-8BEN-E (for business entities). You’re not required to receive a W-9 or file a 1099 for contractors to whom you pay less than $600 in a tax year.
