Among the many tasks of running a small business there lies human resources management. 😩
With no HR team in sight, you are inadvertently responsible for handling onboarding, payroll, and employment taxes for new hires–which can be a daunting task if you don’t know the difference between a W2 Form & 1099 tax form.
W2 Form vs. 1099 Tax Form: The Difference You Need to Know
In a nutshell, self-employed independent contractors that you hire to do a specific job receive a 1099 tax form. Their compensation is paid according to the terms of their contract and they must be given Form 1099 by January 31 to report income on their personal tax return.
W2 Forms are used for employees of your small business that are given regular wages and benefits. As the employer, you are responsible for withholding income taxes, Medicare, and Social Security from employee paychecks, and you ultimately have control over the employee’s job description and work. Copies of IRS Form W-2 must be given to recipients (employees) by January 31.
Create a free TaxBandits account today to easily handle your employment taxes and provide 1099s and W2s by the January 31 deadline!
1099 vs. W2: Is There Really a Difference?
YES. There is a big difference between a W2 form and 1099 tax form. If you file the wrong form for an employee it can result in major penalties and fines from the IRS that your small business can’t afford.
Why Do I Need Contractors If I Have Employees?
Your first instinct might be that you don’t need both; why bother with two different types of labor if it means more paperwork? Well, both independent contractors and employees can positively affect your business. Here are some of the advantages:
Independent Contractor Advantages
- Provides flexibility in hiring and scheduling for job completion
- Brings expertise to the job
- A minimal legal risk to the business
- Saves your business money
- Invested in the business.
- Provides consistency and assists with various areas of the business as needed.
- One-time training compared to multiple training sessions and instructions for independent contractors.
- Offers daily assistance to staff and employer.
- Variety of talents can be used throughout the business.
The Tax Filing Solution Made For Small Business Owners
Designed specifically for you in mind, TaxBandits helps small business owners file employment taxes with a simplified e-filing solution.
Register now to stay ahead of the upcoming January 31 tax deadline!
If you have questions give the awesome, US-based TaxBandits support team a call Monday – Friday from 9 AM to 6 PM EST at 704.684.4751 if you need any assistance.
We’re standing by to help. Also feel free to reach us via live chat, or take advantage of our 24/7 email support at support@TaxBandits.com.