W9 vs W2: Crucial differences you need to know

W9s and W2s are both IRS forms that contain worker information for tax purposes. But while the former is for independent contractors, the latter is for employees. This guide will spell out what employers need to know about each document, and how to comply with tax reporting requirements.  

What is Form W2?

The Form W2 (Wage and Tax Statement) is a tax form that details W2 employees’ annual income and the amount of their earnings withheld for taxes and benefits. 

According to the IRS, employers are required to file a W2 form for every employee they’ve paid $600 or more (including non-cash payments), and for every employee, no matter the amount they were paid, from whom they’ve withheld any income for taxes and benefits.

W2 forms contain the information about:

• All the employee’s compensation, wages, and tips
• Federal and state income tax withholdings
• Social Security and Medicare contributions
• The employer’s name, address, EIN, and other information you can see in the official W2 form

Employers need to fill out W2 forms and send copies to their employees at the beginning of the new tax season. The deadline for filing the W2 forms with the IRS is January 31st for the previous tax year. Employers produce six copies of W2s for every employee:

• Copy A for Social Security Administration
• Copy B to file the employee’s federal tax return
• Copy C for the company’s records
• Copy D for the employee’s records
• Copy 1 for the employee, to file locally or with the state or city upon request
• Copy 2 for the employer, to file locally or with the state or city upon request

What is Form W9?

The Form W9 (Request for Taxpayer Identification Number and Certification) is a document that employers issue to independent contractors and freelancers, to track how much they’ve paid them during the year.

Employers should have independent contractors fill out the W9 forms as soon as they’re hired. According to the IRS, independent contractors must provide the following information in their W9s:

• The name of the entity or individual
• Business name (if applicable)
• Federal tax classification of the entity or individual
• Exemptions
• Address, city, state, and ZIP code
• Social security number (SSN) or Employer identification number (EIN).

Every January, employers are required to use the information from W9s and file a Form 1099 for each independent contractor and freelancer. Employers also send the Form 1099 to each contractor. Since employers don’t pay payroll taxes for 1099 employees, contractors use the information from the 1099 forms to calculate their taxable income and pay their own taxes.

What’s the difference between W2 and W9 forms?

These are the main differences between Form W2 and W9:

1. Worker classification

W2s detail information about employees’ yearly earnings and tax deductions, which is reported to the IRS. W9s, meanwhile, contain taxpayer information for independent contractors, which employers use to fill out 1099 forms that contractors then use to file their own taxes. 

2. Withholding requirements

Employers deduct Social Security, Medicare, federal, state, and local taxes on their W2 employees’ behalf. Companies don’t withhold any earnings or handle tax payments for W9 employees.

3. Reporting obligations

W2s and W9s are both filed annually. W2s are filed with the Social Security Administration, the IRS, and the state (if required).

W9s are filled out by the contractors, then kept by the employer so they can prepare the 1099 forms. Independent contractors file their own taxes.

How to determine whether you need a W2 or W9 form

The type of form you need depends on worker classification. Companies issue W2s to employees and W9s to contractors. It’s crucial to assign the right work category; misclassifying should-be employees as contractors can result in steep penalties.

You can check out Ripping’s Worker Classification Analyzer to learn more about the distinctions. At minimum, you should take the steps below to figure out which form you need to send out:

1. Assess the level of control over work
• W2 employees need to comply with contractual obligations that determine working hours, shifts, methods, tools, resources, and other work-related requirements.
• W9 contractors have autonomy. over how, when, and where they work from.
2. Consider payment frequency and structure
• W2 employees are paid regularly, usually monthly, weekly, or by-weekly; a part of their gross income is withheld for tax purposes.
• W9 contractors are paid in full, without tax withholdings, and set their own payment terms from job to job. They often get paid on a per project or per hour basis, without the 
3. Evaluate eligibility for benefits and company resources
• W2 employees are eligible for different employee benefits such as PTO, health insurance, unemployment. Employers also provide employees with equipment, office space, and other resources needed to do the job. 
• W9 contractors don’t receive benefits and usually use their own resources for work, equipment included.

Streamlined payroll, tax, and compliance management with Rippling

Whether you manage W2 employees, W9 contractors, or a mix of both, Rippling has you covered—domestically and internationally.

Rippling houses your contractor data alongside your full-time employees' HR and IT data on a single platform, making taxes and other reporting a one-click exercise. Integrating your contractors and employees also means contractors can get paid whenever you run payroll.

Rippling automatically generates and distributes 1099 forms to eligible contractors and stores them for later reference. It also automatically calculates and distributes employee salaries, wages, bonuses, and deductions for W2 employees.

W9 vs W2 FAQs

Can an individual receive both a W2 and a W9?

Yes, there are cases when companies use both forms for the same person.

For example, an employee might switch to freelance work, and continue to work for the same company as an independent contractor. Or, a company could decide to hire a person that previously worked as an independent contractor as a full-time employee within the same year. In either case, make sure you’re steering clear of employee misclassification and are ready to undergo any potential IRS audits. 

Does a W9 mean I have to pay taxes?

Companies do not pay or withhold any taxes when a W9 is used. Independent contractors are responsible for their own tax payments.

Why would an employee need a W9?

Employees don’t need a W9.

But, in case an employee decides to become an independent contractor and keep providing services for their old employer, the company can issue a W9 to provide new tax information.

How can I transition a contractor from W9 to W2 status?

To convert a contractor to an employee, you need to:

1. Determine how to classify them by filing the IRS Form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding)
2. Gather employee information by requesting they fill out the Form W-4 (Employee’s Withholding Certificate)
3. Request they fill out the IRS Form I-9 (Employment Eligibility Verification Form)
4. Switch from Form 1099 to Form W2 to ensure payroll compliance

Is a W9 for a 1099 or W2?

Independent contractors and other self-employed workers submit W9 forms to the businesses they provide services for. The businesses use the information from W9 to fill out a Form 1099 (1099-NEC or 1099-MISC), which denotes all the payments to the independent contractor.

You can learn more about 1099 and W2 here.

Who is exempt from providing a W9?

Contractors aren’t required to provide a W9 if their yearly payments don’t exceed $600. They also don’t need the form for payments that fall into categories unrelated to business activities (royalties, reimbursements for personal expenses, etc).

However, it is recommended to request a W9 from every contractor you work with, and make sure the information is correct by running a Taxpayer Identification Number verification.

This blog is based on information available to Rippling as of ___PUBLISH DATE___.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.