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W-2s, W-3s & 1099s: What’s Due and Who Does What

If year-end tax forms make your eyes glaze over, you’re not alone. The good news? The rules are simpler than they look once you understand which forms apply to employees vs. contractors—and who’s actually responsible for each step.

Here’s a straightforward breakdown of W-2s, W-3s, and 1099s, and exactly what to gather.

What each form covers (W-2 / W-3 vs. 1099-NEC / 1099-MISC)

W-2

  • Reports wages paid to employees

  • Includes taxes withheld (federal, state, Social Security, Medicare)

  • Each employee receives their own W-2

W-3

  • A summary cover sheet of all W-2s

  • Sent to the Social Security Administration

  • Totals all employee wages and withholdings

  • Employees never receive this—only the SSA does

1099-NEC

  • Reports payments to non-employees (independent contractors)

  • Required when you pay $600 or more to a contractor during the year. This threshold will increase to $2,000 in 2026.

  • No tax withholding reported (in most cases)

1099-MISC

  • Most commonly used to report rents paid, but also includes prizes or legal settlements (not contractor services)

In short:
W-2/W-3 = employees
1099-NEC/MISC = contractors and other non-employee payments

Who does what (you vs. payroll vs. accountant)

This is where confusion usually creeps in.

You (the business owner)

  • Collect W-9s from contractors

  • Collect Insurance Certificates (for workers' comp audits)

  • Confirm who is an employee vs. contractor

  • Verify totals look reasonable

  • Make sure addresses and legal names are correct

Payroll provider

  • Prepares and files W-2s and W-3s (if employees are set up correctly)

  • Delivers W-2s to employees

  • Files with the SSA

Accountant or bookkeeper

  • Prepares and files 1099s (sometimes payroll does this—confirm!)

  • Helps review contractor classifications

  • Answers edge-case questions (S-corps, reimbursements, mixed roles)

Key takeaway:
Even if you outsource filing, you still own the inputs. Missing or incorrect info upstream causes delays, penalties, and re-filing headaches.

What to collect before filing

Having this ready makes everything faster:

For employees

  • I-9 and supporting documentation

  • W-4(Federal and State if required)

  • Direct Deposit Authorization

  • HR Documents and signatures
 
*Most payroll vendors will help with some of these items, if not all.

 

For contractors

  • Completed W-9

  • Insurance certificate confirming workers' comp coverage

*These should be collected prior to any payments being made to them.  

 

Common mistakes to avoid

Misclassifying contractors

  • Calling someone a contractor doesn’t make them one

  • If you control how/when they work, that’s a red flag

Late or missing W-9s

  • No W-9 = delayed 1099s

  • Delays can trigger penalties and rushed filings

Incorrect legal names or EINs

  • Mismatches cause IRS notices later

  • Always use the name exactly as it appears on the W-9

Assuming someone else handled it

  • Payroll and accountants don’t always coordinate automatically

  • Confirm who is filing what—don’t guess

FAQs

Do S-Corps receive 1099-NEC?
Usually, no. Payments to S-corps and C-corps are generally exempt except for certain services (like legal fees). Always rely on what’s checked on Line 3 of the W-9.

What happens if I don’t have a W-9?
You’re still responsible for filing accurate 1099s. Missing W-9s can lead to incorrect filings, IRS notices, and potential penalties. This is why early requests matter.

What’s the difference between W-2 and W-3?
A W-2 reports wages for one employee. A W-3 summarizes all W-2s and is sent to the Social Security Administration.

 

If you want help systematizing this so it’s easier every year, this is exactly the kind of operational cleanup we help businesses build once—and reuse forever.

 
 
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