It is hard to keep so many different types of tax forms straight. When running a small business, it is important to know which form is used when – along with the compliance concerns to watch out for.

The most common forms you will use in business (and during tax time) are Forms W-4, W-2, W-9, and 1099-NEC.

Let’s dig into each form type to provide a clear distinction, helping your business run most effectively.

Form W-4: Paying Employees

Form W-4, also known as the Employee’s Withholding Allowance Certificate, is filled out by an employee. It is how the employer knows how much to tax to withhold throughout the year. The amount withheld will be based on the allowances claimed – the more allowances, the lower amount of federal taxes withheld from each paycheck.

The personal allowances worksheet that is provided with a Form W-4 helps employees calculate how many ‘allowances’ to claim on the form. PrimePay has a Form W-4 assistance calculator to provide to your employees when they’re filling out a Form W-4, ensuring they claim the right number of allowances.

Some employees may want to update their withholding allowances throughout the year. The time to do this, other than hire date, would be when there is a life event like marriage, birth of a child, etc.

Form W-2: Summary of Wages & Withholdings

Form W-2, Wage and Tax Statement, shows the income and taxes withheld from an employee's pay for the year and is necessary to file your taxes. While the Form W-4 instructs employers what to take out while collecting employee personal data, the Form W-2 is a summary of the wages paid and what was withheld throughout the year (thanks to the W-4).

While a Form W-4 is completed by the employee, Forms W-2 are completed by employers. The IRS requires employers to provide employees copies of their Form W-2 by no later than January 31.

If you’re an employee and do not receive your Form W-2 on time, there are a few steps you can take. Click here to read our article on how to get ahold of your W-2 so you can file your income tax return.

Form W-9: Gathering the Info of Non-employee Payees

If you have any other individuals (or companies) that are doing work for your business, but they are not a W-2 employee, have them complete a Form W-9 prior to doing work for you. A common example of who will fill this form out for you is an independent contractor.

Form W-9, a Request for Taxpayer Identification Number and Certification, does it exactly what it sounds like. It captures the information of the person, or company, doing work for your business. From here, you can record their wages.

It differs from a Form W-4 in the sense that it does not have any kind of withholding or allowance information. Its main purpose is to gather the information of the payee so you can accurately complete a Form 1099-NEC.

Form 1099-NEC: Summary of Payments

A Form 1099-NEC is to a Form W-9 like a Form W-2 is to a Form W-4. Except withholdings are not recorded.

Like a Form W-2, a Form 1099-NEC must be filled out by the employer and provided to the individual or entity by January 31. This form will report what is paid to the individual or entity and their reporting details (like name, address, SSN or TIN), but all of the tax payments are up to the payee of this form.

6 More Forms to Know

When in Doubt, Let PrimePay Help

PrimePay’s All-Inclusive Payroll bundle comes complete with federal and state tax filing for your business, and it could also handle the distribution of your Forms W-2!

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Disclaimer: Please note that this Q&A is not all inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding specific application of the information to your own plan.