The difference between a Form w-2 and a Form 1099-MISC or Form 1099-nec

Understanding the Difference Between Form W-2 and Forms 1099-MISC or 1099-NEC

Although these forms are all classified as information returns, they serve distinct purposes based on the type of income being reported and the relationship between the payer and recipient.

Form W-2: Wage and Tax Statement

Employers use Form W-2, Wage and Tax Statement to:

• Report wages, tips, and other compensation paid to employees.
• Report taxes withheld from employees' income (e.g., income and Social Security taxes).

Employers must provide Form W-2 to both the employee and the Social Security Administration (SSA), which then shares the data with the IRS.

Forms 1099-MISC and 1099-NEC

Payers use Form 1099-MISC, Miscellaneous Information and Form 1099-NEC, Nonemployee Compensation for reporting:

• Form 1099-NEC: Payments of at least $600 to nonemployees for services provided in the course of a trade or business.
• Form 1099-MISC:
  • Payments of $10 or more in gross royalties.
  • Payments of $600 or more for rent or other specified purposes.
• Payment information must be reported to both the IRS and the recipient of the payment.

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