W-2 vs. 1099: Which Do You Need?

A W-2 and a 1099 both report money paid for work. Which one applies isn't a choice. It follows from whether the worker is an employee or an independent contractor, and that changes who withholds taxes, who pays Social Security and Medicare, and which paperwork the worker gets during the year.

The short answer

If the worker is…	They get during the year	They fill out at the start	They get at year-end	Threshold
An employee	Pay stubs	Form W-4	Form W-2	Effectively every employee with Social Security or Medicare withheld
An independent contractor paid for services	Payment statements (optional but useful)	Form W-9	Form 1099-NEC	$2,000+ in 2026 from one payer's business
Paid rent, prizes, royalties, etc.	—	Form W-9	Form 1099-MISC	Mostly $2,000+; royalties $10; attorney gross proceeds $600

How the IRS tells employees from contractors

The IRS looks at how much control the business has, in three categories:

• Behavioral control. Does the business control, or have the right to control, what the worker does and how they do it? Detailed instructions, training and set methods point toward employment.
• Financial control. Does the business control the money side of the job: how the worker is paid, whether expenses are reimbursed, who provides the tools? A worker who can make or lose money on the job looks more like a contractor.
• Type of relationship. Is there a written contract, employee-type benefits like insurance or paid leave, an expectation that the work continues indefinitely, or work that is central to the business?

No single factor decides it. If the answer is unclear, either side can file Form SS-8 for an official determination, though the IRS says that can take at least six months.

Getting it wrong is expensive for the business. Treating an employee as a contractor without a reasonable basis can make the business liable for the employment taxes it didn't withhold or pay. Workers who believe they were misclassified can use Form 8919 to report their share of Social Security and Medicare on wages that should have been on a W-2.

Worked example: the same $52,000, two ways

A worker is paid $52,000 in 2026, either as wages of $2,000 every two weeks or as contractor fees.

	As a W-2 employee	As a 1099 contractor
Federal income tax withheld	$4,059.90 for the year (single, standard W-4: $156.15 × 26)	None; the worker typically makes quarterly estimated payments
Worker's Social Security and Medicare	$3,978.00 withheld (7.65%)	Self-employment tax: $52,000 × 92.35% × 15.3% = $7,347.37, if there are no business expenses
Business's share	$3,978.00 matching tax, plus FUTA (up to $42 with full state credit) and state unemployment tax	None
Year-end form	W-2 by February 1, 2027	1099-NEC by February 1, 2027

The contractor pays roughly both halves of Social Security and Medicare, though half of the self-employment tax is deductible when figuring adjusted gross income, and business expenses reduce the net earnings it applies to. The employee's half is withheld from every paycheck, and the employer pays the other half.

Which documents go with each status

For an employee:

1. Form W-4 at hire, so withholding is right from the first paycheck. Our W-2 vs. W-4 guide explains how the two forms relate.
2. A pay stub every payday, required in many states.
3. Form W-2 after year-end. Our W-2 generator prepares the employee and employer copies, at $14.99 per employee.

For a contractor:

1. Form W-9 before the first payment. We prepare W-9s free.
2. A contractor payment statement with each payment, labeled as a contractor statement with no payroll withholding lines.
3. Form 1099-NEC after year-end if you paid $2,000 or more for services in 2026. Our 1099-NEC generator prepares recipient copies at $9.99 each.

Deadlines and filing for 2026 forms

	W-2	1099-NEC
Furnish to the worker	February 1, 2027	February 1, 2027
File with	SSA (Copy A with Form W-3)	IRS (Copy A, through IRIS or on paper with Form 1096)
File by	February 1, 2027	February 1, 2027
E-filing required	At 10 or more information returns in total	Same 10-return aggregate rule

Our documents are the copies you furnish and keep. Filing Copy A is a separate step, covered in generated vs. filed tax forms.

If you're the worker

Look at what you received. A W-2 means the payer treated you as an employee and withheld taxes. A 1099-NEC means they treated you as a contractor, and nothing was withheld. Plan for estimated taxes and self-employment tax. If you think the label is wrong, the SS-8 and 8919 routes above exist for exactly that.

Contractors who need proof of income during the year can see our 1099 pay stub generator guide.