W-2 and 1099 Filing Guide for Small Business Owners

January is crunch time for payroll compliance. W-2s and 1099s must be issued to workers and filed with the government by January 31. Here's everything you need to know.

A W-2 reports an employee's annual wages and the taxes withheld from their paychecks.

Who gets a W-2: Every employee you paid during the year, even if they only worked briefly.

What it reports:

• Total wages paid
• Federal income tax withheld
• Social Security and Medicare taxes withheld
• State income tax withheld (if applicable)

Deadline: January 31 — both to the employee and to the Social Security Administration.

How to file: Electronically through the SSA's Business Services Online portal, or through your payroll software.

A 1099-NEC (Nonemployee Compensation) reports payments made to independent contractors.

Who gets a 1099-NEC: Any contractor or freelancer you paid $2,000 or more during the year for services.

Exceptions — you do NOT need to issue a 1099 to:

• Corporations (including S-Corps and C-Corps) — with some exceptions
• Payments made via credit card or PayPal (the payment processor issues a 1099-K instead)

Deadline: January 31 — both to the contractor and to the IRS.

How to file: Electronically through the IRS FIRE system, or through your payroll/accounting software.

Before you can issue a 1099, you need the contractor's tax information. Have every contractor complete Form W-9 before you pay them — not at year-end when you're scrambling.

A W-9 collects:

• Legal name
• Business name (if different)
• Tax classification (individual, LLC, corporation, etc.)
• Taxpayer Identification Number (SSN or EIN)

The IRS charges penalties for late, incorrect, or missing information returns:

• $60 per form if filed within 30 days of the deadline
• $120 per form if filed after 30 days but before August 1
• $310 per form if filed after August 1 or not filed at all

For intentional disregard: $630 per form, no cap.

For more on the classification rules that determine who gets a W-2 vs. a 1099, see our guide on 1099 vs. W-2: what's the difference.

• 1099 vs. W-2: What's the Difference and Why It Matters
• Payroll Tax Deadlines Every Small Business Owner Must Know
• 7 Payroll Mistakes Small Businesses Make
• Employees vs. Contractors: Payroll and Tax Implications
• Our Payroll Services
• Contact Us

Need help with W-2 and 1099 filing? The Gap ProAdvisors handles year-end payroll compliance for small businesses. Contact us before January to make sure you're covered.