What Is The Difference Between W2 And W9? (Difference Explained)

A career is an experience that you commence during your life; building a good career and education plays a major role in the quality of life you live. The right education and skills can help build your profession. Careful and well-thought decisions regarding your career can increase your chances of success.

In life, you frequently hear the words career and job and think that both have the same meaning; however, they both mean different things.

A job is a precise work for which you get paid and is pursued solely by financial gain and survival. You might take a job or earn extra cash, but it has minimal impact on your future work life. And your first job’s duties or responsibilities could have differed from the second job and the second from the third one.

So, you might require different skills, knowledge, and training for your jobs. In short, you are working to earn money and fulfill your life requirements.

A W9 provides the business with the tax information necessary to file a salary statement at the end of the tax year on behalf of newly employed independent contractors. At the end of each tax year, the business completes and submits a W2 to the government on behalf of its employees.

Read on to know more about the differences between W2 and W9.

Page Contents

What Is A Career?

A career is a long-term pursuit of a lifelong ambition, a person’s chosen profession or occupation.

It is also called a career path. As you work on the job, you build skills, knowledge, and experiences that will fuel your professional life for years.

A profession is a sequence of connected employment where you build up skills at earlier employment opportunities to move you into higher paying and higher prestige employment opportunities later. Your career will include education, training, work experience, and community involvement.

So, choosing a career is one of your most important decisions. If you land yourself in the wrong job, you will be wasting half your energy hating the job, and in the end, it will not only affect your professional life.

Still, it will also be hampered—by the importance of choosing a career that must emphasize satisfaction.

A virtuous career is one of the greatest satisfactions you will ever experience, and a bad one is one of life’s greatest regrets. Hence, emphasize best if you were well-considered and researched to make the right career decision.

Types Of Careers

There are four types of careers:

Skill based
Knowledge-based
Entrepreneur based
Freelancer

1. Skill Based

You need specific learned capabilities to perform a given job well. Depending on the precise role, examples range from supervision accounts and coding to writing tenders. There is a discrepancy, however, to be made between hard skills and soft skills.

Although a complex skill is a technical and calculable skill that a professional may demonstrate through their specific qualifications and professional experiences, a soft skill is a non-technical skill that is less rooted in specific inclinations.

An example of a complex skill is computer programming or expertise in a foreign language. However, a soft skill may be time management or verbal communication.

2. Knowledge-Based Skills

These skills are based on a specific occupation, such as computer skills, teaching skills, etc. These skills fall into three categories:

Knowledge: means mental and intellectual abilities.
Skills: mean the physical capacity to perform a task.
Ability: means talent or proficiency in something.

3. Entrepreneur Based

Entrepreneurial skills can include various skills, such as technical skills, business management skills, and creative intellect. Although you can apply to many job roles and industries, developing your entrepreneurial skills can mean developing several skill sets.

For instance, you may need to develop your business management skills to be a successful business owner. To maintain successful project teams, you must improve your leadership and communication skills.

4. Freelancer

Freelance skills are the capabilities that prepare individuals to communicate well with companies, advertise their service area, and comprehend their work for clients professionally. They generally complete contract work when a business hires them for a particular task.

Companies refer to them as contractors rather than workers because they are self-employed. Freelancers can use their abilities to work in a variety of industries, including accountancy, web development, writing, editing, and education.

Different kinds of jobs or businesses require contracts. Contracts are legal agreements defining the working relationship, terms, and conditions between the employer or company and the employee. These contracts may vary depending on the nature of the work.

They include roles and responsibilities, company policies, tax information, and other compensation and benefits. These kinds of contracts are called employment contracts.

What Is A W2 Contract?

There are two types of employment associations for a professional: as an employee or as an independent contractor.

And when you work as an employee, you are a W2 employee, which means your employer will send you a W2 at the end of the year with a summary of all the compensation you received in the previous year and the taxes that have been deducted from it for Social Security, Medicare, and other things of that nature.

As a 1099 employee, you are seen as an independent contractor. And in that scenario, no taxes are taken out of any of your compensation.

You just paid the full amount, and then it’s your responsibility at the end of the year or if you’re paying quarterly to pay all the taxes to the state or the federal government, depending on where you’re working.

Benefits Of W2 Contracts

There are multiple benefits to working under this contract:

If you are a healthcare provider, you could deduct your insurance, supplies, rental space, travel, or anything associated with you. Suppose you’re working for the company or you are an independent contractor. In that case, the benefits from a W2 include healthcare, travel reimbursement, continuing education, and support.
That’s what makes the W2 position attractive, I guess. An attorney who helps professionals also find that many independent contractors need to budget for having to pay the taxes on what they’re paid throughout the year.
They’ll get it at the end of the year and owe a significant amount of money. Therefore, you will not owe anything back to the administration at the end of the time.
What does it mean to work under a W2 contract? It’s not referred to as a W2 contract if you sign an employment contract. Because you receive the W2 at the end of the year, you are considered a W2 employee.
Employers enjoy this advantage as they have more control over an employee. They command an employee’s training, daily agenda, and responsibilities. Hiring an employee could be wise if an employer needs to have a task completed uniquely.
Similarly, some employees desire stability and an expectable schedule. Workers advantage from job safety and employers obtain value from dependable workers. Consistent team members allow employers to delegate tasks easily and free up their time.

Disadvantages Of Working As A W2 Employee

Employers pay taxes, benefits, and training, among other items. These costs can expand, especially health care for US-based companies. These employers repay 82% of an employee’s health care fee regularly.

Employers usually spend time training and dealing with them. It is an important time commitment, and many employers need more time to train employees.

Also, some workers generally work on a fixed timetable, like 8 to 5 PM or 9 to 6. Some employees feel controlled by working fixed hours and feel imprisoned.

Greatest Industries For W2 Workers

The company would benefit more from having W2 employees, depending on the key characteristic of the occupation. Some industries that provide more advantages to W2 workers include healthcare, education, and government.

These industries are recession-resistant and will often have job openings. For workers in these industries, education is compulsory throughout the year. Government jobs are more constant than others since tax profits support them.

The capability to raise tax revenue also enables government employees to receive generous benefits like pensions and the best healthcare. W2 employment provisions are appropriate for growing companies that need long-term team associates.

These growing companies must also have adequate funds to afford employee expenses.

What Is A W9 Contract?

W9 is a straightforward form that identifies the payee of an amount. The payer uses the W-9 form data to fill out various information reports to the IRS (Internal Revenue Service). The payer requests the identification information in Form W-9 from the payee.

If you are paying independent contractors or freelancers more than $600 each for completed work and you don’t employ those people, you need to collect a duly filled W9 form.

Apart from that, if you are legally obliged to file the following forms, you must obtain a W9 from payees:

Form 1099-MISC (various types of income, prizes, awards, or gross proceeds)
Form 1099-DIV (dividends, including those from stocks or mutual funds)
Form 1099-B (stock or mutual funds sales and certain other transactions by brokers)
Form 1099-S (proceeds from real estate transactions)
Form 1099-K (transactions using merchant cards and third-party networks)
Form 1098 (home mortgage interest)
Form 1098-E (students loan or interest)
Form 1098-T (tuition)

How To Submit The W9 Form?

The W9 form is not filed to IRS. You must hand the form to the requester, who may be your client.

If you have a contractor who won’t provide a form with the correct TIN (Taxpayer Identification Number) or SSN (Social Security Number), the IRS requires that you start withholding tax money at the rate of 28% of your payments to that contractor until you receive the correctly filled form.

Also, note that if you do not resort to backup withholding if the payee fails to submit the form IRS may impose a penalty on you.

Benefits Of W9 Contracts

In this contract, the biggest benefit is that you are your boss. It is the main reason people decide to become freelancers or independent contractors. Because of the IRS form, they enjoy more flexible employees. As an independent contractor, you manage your work according to your schedule.
Your clients want certain results in return for the fees they pay you. While you and your client can negotiate on the final product, you can decide when, where, and how the work is done.
According to the Common Law Rules (IRS) and the Fair Labor Standards Act issued by the Department of Labor, the difference between an employee and a contractor largely hinges on the degree of control and independence the client grants.
As a self-determining contractor, you gross more money than a worker (employee). Corporations might be enthusiastic about paying more for independent contractors.

Disadvantages Of Working In W9 Contractor Or Independent Contractor

The biggest con of being self-employed is managing and paying your taxes. They must pay a medical and social tax of 15.3 % (self-employee tax rate) and income tax on their total income.
You must spend money on tools, equipment, and licenses as a self-employed person.
As an independent contractor, you cannot enjoy company benefits such as medical leaves, health care, overtime, sick leaves, pension, insurance, and retirement plans.
Being self-employed may make you feel isolated or lonely while working. When you’re a contractor, especially if you always work from home, you may miss daily water cooler conversations and work among people.

Difference Between W2 And W9

Characteristics	W2	W9
Employment	Traditional employee	Independent contractor
Team	Part of your team	Complete the task on your request
Supervisor	Has a supervisor	Without outside supervision
Rules	Can be given tasks, schedules, and dress code	Based on your instruction, home-based on the job
Benefits	So many benefits, such as health insurance, life insurance, etc.	No benefits
Pros	Benefits: Insurance, Retirement matching, Education, Job security	Higher pay; Freedom; Flexibility; Tax options; Retirement control
Cons	Less flexibility; Less freedom; Lower pay	Less job security; No benefits; No retirement matches

Comparison Table: W2 and W9

Let’s watch this video to distinguish the differences between 1099 and W2 employees.

Conclusion

Various tax forms are needed when working as an employee or an independent contractor. Two of the most commonly used documents include the W-9 and W-2 forms.
Though these tax papers are two very diverse forms, they are both associated with the same procedure and work for hand in hand when reporting earnings to the IRS.
A W2 is a wage and tax statement for employees, and a W9 is an independent contractor form.
W9 contractors are independent employees and work according to your instruction; W2 employees work under the supervisor.