What is a W-2 form?
Employers use a W-2 Wage and Tax Statement to report their employees' taxable wages and any taxes that were withheld from their paychecks. For each employee that you paid during the tax year, you must keep a copy of the W-2 in your records, file a copy with the Social Security Administration, and provide a copy to your employee. There are only a few rare scenarios where you wouldn't need to file a W-2 for an employee, but if you are unsure, ask a tax lawyer or accountant.
W-2 vs W-4: What's the difference?
A W-4 Employee's Withholding Certificate is a form completed by employees that allows employers to withhold the correct amount of federal income tax from each paycheck. A W-4 form provides an employee's name, address, Social Security number, tax filing status, and other information that can be used to adjust the withholding amount. A W-2, on the other hand is a report of what taxable income the employee earned and what amount of taxes were withheld based on the information provided in the W-4.
What is the W-2 deadline?
For any employee that remained employed through December 31, W-2's must be sent to the employee and to the Social Security Administration by January 31st. Employees who stop working during the tax year are entitled to request their W-2's any time following their departure. If requested, those W-2's must be sent within 30 days of the request or 30 days after the final wage payment, whichever is later. Some states may have a separate filing requirement for W-2's, so it is recommended that you also check your state tax department's website or talk to a local accountant or tax attorney.
Note that if you are filing W-2s as an employer, January 31st is also the deadline to file your Form 940 Federal Unemployment Tax Act (FUTA) tax return as well as your Form 941 fourth quarter payroll tax return.
Can I file W-2's online?
Yes, the Social Security Administration does allow you to file W-2's online. In fact, if you have more than 250 W-2's to file, you must do so online. In the next few years, this limit will decrease to 100 in 2021 and down to 10 in 2022. If you do file by mail this year, please note that you are also required to file a W-3, which is a summary of the information found in your W-2s.
W-2 vs 1099: What is a 1099 form?
Unlike a W-2, which is used for reporting employee compensation, Form 1099-MISC is used to report compensation paid to an independent contractor during the tax year. Regardless of whether the contractor is a consultant who does specialized work for you routinely or a plumber that you hired once, if you paid them more than $600, you may need to file a 1099-MISC. There are a few common exceptions including payments to corporations, payments made through a payment processor like PayPal, or payments to contractors hired through a third-party platform. If you are unsure about filing a 1099, a tax lawyer or accountant can help.
W-9 vs 1099: What's the difference?
Before you can file a 1099, you'll need to collect certain tax information about each contractor. A W-9 Request for Taxpayer Identification Number and Certification filled out by the contractor provides the information that you'll need, including their name, address, and taxpayer information like Social Security or Employer Identification number. Generally, this form is filled out at the start of an engagement.
What is the 1099 deadline?
Similar to W-2's, all 1099's must be sent to the contractor and to the Social Security Administration by January 31st. Some states have additional filing requirements for 1099's, so it is recommended that you also check your state tax department's website or talk to a local tax professional.
Can I file a 1099 online?
Yes, you may file 1099's online, however you are required to use IRS-approved software to properly format the file. If your accounting or payroll software handles 1099's, it likely includes e-filing. If you decide to file by mail, it is important to note that you cannot download and print the form, you must order one from the IRS and remember to include a Form 1096 summary. Like W-2's, if you are filing more than 250 forms this year, you must file online. The mandatory e-file limit will decrease to 100 forms in 2021 and 10 forms in 2022.
Is there a penalty for not filing 1099 or W-2 forms or filing late?
Yes, the IRS can issue fees and other penalties if you fail to comply with their regulations. Your business may be subject to penalties for filing late, filing forms with missing or incorrect information, filing the wrong forms (i.e. filing W-2's for contractors or 1099's for employees), or filing downloaded forms. Generally speaking, if you file by mail, you must order the official forms printed by the IRS, not those found online.
If you need more time to file, you must send your request for an extension on your 1099 or W-2 deadline by January 31st. Note that extension requests are not granted automatically, so you may still be subject to late fees.
In the end, a good rule of thumb is to prepare your W-2's and 1099's well in advance of the deadline and to speak with a tax lawyer or accountant if you have any doubts.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.