1099-MISC or W-2? Which Form You Need to File for Your Workers

There are a lot of IRS forms that need to be completed for your company. But when it comes to Form 1099-MISC and Form W-2, which one should you choose to report payments made to workers within the course of your business?

Form 1099-MISC vs. W-2 Forms
Form 1099-MISC is used to report financial details regarding payments you’ve made to workers for their services as they relate to your business throughout the year. W-2 Forms are also used to report financial details regarding payments you’ve made to workers for their services as they relate to your business throughout the year. The differences are in the nuances of each form.

Basically, Form 1099-MISC is used to report payments made to independent contractors while W-2 Forms report payments (or salaries) paid to employees. But how do you decide if someone has been hired as an independent contractor or an employee?

Well, you could complete Form SS-8 and submit it to the IRS and they’ll let you know into which category your workers fall. This process could take up to six months, though, so if you’d like to figure it out a little faster, just scroll down a little further!

How to Decide
You can determine your workers’ types of employment by assessing the degree of control and independence each worker has over the job he or she has been assigned. You can determine this degree of control by considering the three following categories:

• Behavioral control, or whether you exercise the right to direct or control how the worker does the work. Businesses have the right to direct and control employees regarding how their work is done but not how independent contractors complete a job.
• Ask Yourself: Do you control or have the right to control what and how the worker does his or her job?
• Financial control, or whether you have the right to control the economic aspects of your worker’s job. The company generally controls these variables for employees while independent contractors will be in charge of them for him or herself.
• Ask Yourself: Are you responsible for how the worker’s paid, expense reimbursement, and providing tools/supplies?
• Type of Relationship, or how you and the worker perceive your relationship. Contracts, employee benefits, and work permanency can provide insight into identifying the relationship. Employees tend to require more contracts and employee benefits and are more of a permanent part of your business than independent contractors.
• Ask Yourself: Do you have written contracts or employee-type benefits (i.e., pension plans, insurance, vacation pay, etc.) for your workers? Will your relationship continue and is their work a key aspect of the business?

Be sure to weigh all of these factors so you can accurately determine which form you need to complete for your payees.

Then, once you’ve correctly assessed the status of your workers and which forms they need, you can easily and securely e-file Form 1099-MISC or Form W-2 with ExpressIRSForms! Create an account today!