What is the difference between a 1099 and W-2 Forms?

One of the ways by which a 1099 and W-2 forms can be differentiated is by knowing when and how the two forms should be used. W-2 forms are expected to be used by employees either they are employed to offer temporary services, or they are employed on a permanent basis. On the W-2 forms, the total income or revenue of the employees, together with their health and medical benefits, are revealed.

W-2 forms also reflect the amount being deducted for federal, state, and local-governed taxes. Since W-2 forms are for employees, they are expected to be submitted to the Internal Revenue Service between certain stipulated times. On the other hand, 1099 forms are to be used by independent contractors. These are people that own their businesses, which means they are not employed to do certain jobs. 1099 forms don't reflect taxes from health and medical income. While employees are expected to submit their W-2 forms together with a W-3 form, independent contractors are expected to submit their 1099 forms together with the 1096 form.

There are two different forms you will choose from to file for wage and income tax. W-2 forms demonstrate the employee’s overall income and revenue. The W-2 form should also reflect any earnings and proceeds from medical and health income and benefits as well as any money from social security. Deductions for federal taxes and those who are withdrawn local and state governed taxes should also be shown on the W-2 form.

This particular form is used for employees reporting for work on a temporary or consistent basis. For independent contractors, the 1099 is the correct form. To be categorized as an independent service provider, the person should possess his or her own registered personal business, and his company provides work to other people. Taxes are withdrawn for health, and medical income, as well as social security, are not shown in the 1099 forms. The key distinction between the two is that when you submit a 1099 form, you are exclusively liable for all the taxes and deductions withheld from total earnings.