What is the difference between a 1099 form and a W-2 form for U.S. taxes?

What the forms are used for

Both forms tell the IRS how much you were paid during the year, but they apply to different kinds of work relationships.

W-2: employee pay with payroll withholding

If you are an employee, your employer gives you a Form $W\text{-}2$.

• It reports your wages, tips, and other compensation.
• It also reports amounts withheld from your pay, such as federal and state income tax withholding, and payroll taxes for $\text{Social Security}$ and $\text{Medicare}$.
• Your employer generally pays part of the payroll taxes on your behalf.

1099 (often 1099-NEC): contractor pay, usually no withholding

If you are paid as a nonemployee (independent contractor/freelancer), a business often issues a Form $1099\text{-}NEC$.

• It reports nonemployee compensation.
• Typically, no payroll taxes are withheld from the payments.
• You generally handle your own tax payments, which often includes self-employment tax (covering the worker share of $\text{Social Security}$ and $\text{Medicare}$).

Why it matters when you file

• With a $W\text{-}2$, you usually report wage income and credit the taxes already withheld.
• With a $1099\text{-}NEC$, you usually report business/self-employment income, may deduct eligible business expenses, and may need to make estimated tax payments.

Quick rule of thumb

If taxes were taken out of your paycheck and you had an employer-employee relationship, it is usually $W\text{-}2$. If you were paid per job or invoice and taxes were not withheld, it is often a $1099$.