It's essential to comprehend the dissimilarities between W9 and W2 forms if you live in the United States since both are regularly used for tax reasons but they have distinct objectives. With an accurate understanding of their differences, you can guarantee that your form selection is precisely suited to your unique circumstance. This post will provide a clear explanation of what each form is used for, who is required to fill out each form, and the information required on each form. Additionally, we will compare and contrast the two forms to highlight their key differences. By the end of this post, you will have a better understanding of when to use a W9 form and when to use a W2 form.
The W9 form is a valuable tool for ensuring accurate and compliant tax reporting for both taxpayers and entities that must report their income to the IRS. Since payers use the data provided in these forms to prepare the information returns, it is essential that all of the requested information is accurately and completely provided. In addition to providing a taxpayer's identification number and certifying their correct name, taxpayers should also indicate whether they are exempt from backup withholding, which occurs when an employer or other payer believes an individual may not be reporting all of their income. With this in mind, taxpayers are encouraged to take care when completing W9 forms in order to ensure accuracy when filing with the IRS.
Businesses, organizations, and other entities required to submit an information return with the IRS can request a W9 form from any vendors, contractors, or third parties they pay. These so-called "requesting parties" must furnish this document if their payment for services or goods surpasses $600 in a single year.
The information required on a W9 form includes the taxpayer's name, address, and taxpayer identification number (TIN), which can be their social security number (SSN) or employer identification number (EIN). The form also includes a certification section where the taxpayer confirms that the information provided is correct and that they are not subject to backup withholding. Additionally, the form includes a section for the taxpayer to indicate their tax classification, such as individual/sole proprietor or partnership.
It is important to note that the W9 form is not sent to the IRS, but it is kept on file by the requesting party and may be provided to the IRS upon request. The requesting party will use the information provided on the W9 form to report the income paid to the taxpayer on an information return, such as Form 1099-MISC.
A W2 form, also known as the Wage and Tax Statement form, is a document used to report an employee's wages and taxes withheld to the IRS. The W2 form is utilized to disclose an employee's complete earnings for the given year in addition to any taxes withheld from their salary, including federal income tax, Social Security tax, and Medicare taxes.
By January 31st of the subsequent year, employers must fulfill their obligation to provide each employee with a copy of the W2 form and file another copy with the Social Security Administration (SSA). If filing paper forms, this should be completed by February's end. However, if filing electronically then it needs to be finalized by March.
The information required on a W2 form includes the employee's name, address, and Social Security number. It also includes the employee's gross wages, tips, and other compensation, as well as the taxes withheld from their pay, such as federal income taxes, Social Security taxes, and Medicare taxes. The form also includes the employer's name, address, and Employer Identification Number (EIN).
It is important to note that the W2 form is not only used to report the employee's wages and taxes to the IRS but also to the employee, as the W2 form is used by the employee to prepare and file their federal and state income tax returns.
Employers must also provide a copy of the W2 form to the employee by January 31st, so that they can file their tax return by the April 15th deadline.
Crucial differences exist between the W9 and W2 forms, necessitating specific usage in different circumstances. These distinctions include the details needed to be filled out, who is mandated to submit each form, as well as how and when they should be submitted for tax purposes.
The information required on a W9 form includes the taxpayer's name, address, and taxpayer identification number (TIN), which can be their social security number (SSN) or employer identification number (EIN). The form also includes a certification section where the taxpayer confirms that the information provided is correct and that they are not subject to backup withholding. Additionally, the form includes a section for the taxpayer to indicate their tax classification, such as individual/sole proprietor or partnership.
On the other hand, the W2 form requires the employee's name, address, and Social Security number. It also includes the employee's gross wages, tips, and other compensation, as well as the taxes withheld from their pay, such as federal income taxes, Social Security taxes, and Medicare taxes. The form also includes the employer's name, address, and Employer Identification Number (EIN).
In terms of who is required to fill out each form, a W9 form is typically requested by businesses or organizations from their vendors, independent contractors, or other third parties when they are paid $600 or more in a calendar year for services or goods. On the other hand, a W2 form is filled out by the employer for each of their employees.
The W9 form is typically submitted to the requesting party, such as a business or organization, rather than the IRS, and should be submitted as soon as possible, but no later than the date payment is made. The W2 form, however, is submitted by the employer to the IRS and should be filed by the end of February if paper forms are used, and by the end of March if electronic forms are used. Additionally, employers must also provide a copy of the W2 form to the employee by January 31st.
Not filing your W9 or W2 forms correctly with the IRS can have serious consequences. For W9 forms, if the requesting party does not receive a completed W9 form, they may be required to withhold 28% of the payment for federal income taxes. Additionally, if a W9 form is not properly completed or is submitted late, the requesting party may be subject to penalties and fines from the IRS.
For W2 forms, if an employer fails to file a W2 form with the SSA or if the form is not properly completed, the employer may be subject to penalties and fines from the IRS. Additionally, if an employer fails to provide a W2 form to the employee by the January 31st deadline, the employee may have difficulty preparing and filing their tax return, which could result in penalties and fines for them as well.
Not filing your W9 or W2 forms correctly can lead to fines and penalties from the IRS and can cause inconvenience for the parties involved, it is important to ensure that the forms are completed correctly and filed on time to avoid any potential issues.
In summary, W9 and W2 forms are both used for tax purposes, but they serve different purposes and are used in different situations. Understanding the differences between these two forms is important to ensure that you are using the correct form for your specific situation.