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Contractor or Employee: Tax Forms You'll Need

IRS Forms W-2, W-4, W-9, 1099

How you classify a worker (as an independent contractor or as an employee), determines which tax forms are required. A contractor uses a W-9 and a 1099-NEC, and a payrolled employee needs a W-4 and a W-2. 

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Employees fill out IRS Form W-4 when they are hired, telling the employer how much tax they want withheld from their paychecks. A W-2 form is issued at the end of the year detailing how much the employee was paid and how much tax was withheld. These must be postmarked by Jan. 31 of the following year. 

Independent contractors, when they are hired, must fill out a W-9 with the business name, business type and either a Social Security Number (for an individual) or an Employee Identification Number (for a business).   

1099-NEC (non-employee compensation) form is used to report payments made to independent contractors, freelancers, sole proprietors and self-employed individuals. Incidentally, this form replaced the longstanding 1099-MISC in 2020. That form is still used to report rent, prizes and awards, payments to an attorney, certain medical and health care payments, and (oddly enough) fishing boat proceeds, among other things. 

An employer that pays a contractor at least $600 in a calendar year is responsible for sending the contractor a completed 1099-NEC by Jan. 31 of the following year. Once all the 1099s are mailed, an employer must file Form 1096 with a summary of all the 1099s that were prepared. This also must be postmarked by Jan. 31. 

One caveat: If any federal tax was withheld on non-employee compensation, an employer must prepare a 1099, even if the amount was less than $600.  

Jason Levan

Jason Levan joined Kuzneski Insurance Group in 2021 as Director of Communications and Content after his first career as a newspaper reporter and editor. In Act II, he oversees the content marketing for the company, with the goal of making the insurance world easier to understand and navigate for our clients. When he’s not at work, you can often find him “banging and clanging” in the gym, or spending time with his family.

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