The W-2 is a critical tax document that employers must provide to employees annually to report compensation and tax withholding information. It details an employee’s annual wages, tips, and other compensation from their job. The W-2 also shows the amount of federal, state, and other taxes that were withheld from the employee’s paychecks throughout the year to cover their income tax obligations.
The W-9 is used by contractors to provide their taxpayer identification number and certification of tax status to employers or clients hiring them for work. It allows employers and clients to gather the information needed to accurately report payments made to independent contractors on a 1099 form for IRS reporting. Completing the W-9 is required when starting work for a new payer.
The 1099-NEC reports nonemployee compensation for independent contractors. It shows the total payments made to a contractor over $600 for the tax year. Employers must distribute the 1099-NEC to contractors by January 31st to report the prior year’s payments so contractors can properly include the income when filing their tax returns.
The 1099-MISC is used to report various types of miscellaneous income paid to a contractor or vendor over $600 during the tax year, such as rent, prizes, and payments for services. The 1099-MISC provides information contractors need to report the income, while supporting payer tax reporting and compliance.