Prepare Now for W-2s, 1099s, and Tax Season

As the year draws to a close, business owners should be thinking ahead to one of the biggest administrative responsibilities of the year: preparing for W-2s, 1099s, and tax season. Early preparation helps ensure compliance, avoid penalties, reduce stress, and create a smooth experience for you and your team.

This guide breaks down what you need to know, including form definitions, how to classify workers correctly, key deadlines, proactive steps to take, and how Group Management Services (GMS) can support you every step of the way.

Understanding W-2 vs. 1099: What’s the Difference?

A critical first step for tax season is knowing which tax forms apply to your workers.

What is a W-2?

A Form W-2, or Wage and Tax Statement, reports wages paid to employees and the taxes withheld on their behalf. Employers must withhold federal income tax, Social Security, Medicare, and other applicable taxes, and report that information on the W-2.

What is a 1099?

A Form 1099-NEC reports non-employee compensation, such as payments to independent contractors, freelancers, and other non-employees, when total payments reach certain thresholds. Unlike W-2 wages, these payments are not subject to tax withholding. Contractors are responsible for their own tax obligations.

Accurate classification between employees and independent contractors is essential. Misclassification can lead to penalties and compliance issues with the Internal Revenue Service (IRS).

Why Compliance Matters

Complying with IRS rules for payroll and information returns is not just paperwork. It is a legal requirement that protects your business.

Avoiding Costly Penalties

Failing to file correct W-2 and 1099 forms on time can result in penalties that increase the later you file. The IRS tracks timeliness and accuracy, and penalties can add up quickly, especially if mistakes are widespread or repeated.

Keeping Worker Records Straight

Providing accurate forms to employees and contractors helps them file their own tax returns correctly and prevents mismatches with IRS records that could trigger audits or notices.

Supporting Your Team’s Financial Wellness

Timely and accurate W-2s and 1099s reduce confusion and frustration for your workforce, and contractors come tax filing time. It is a simple way to reinforce professionalism and care for your people.

Key Deadlines You Must Know

While deadlines can shift slightly year to year, here are key dates to mark on your calendar as you prepare:

January 31, following the close of the tax year: Deadline to furnish both W-2s and 1099s to recipients, including employees and contractors, and in most cases file with the IRS or Social Security Administration (SSA).
January 31 or early February: Typical deadline to file Forms 1099-NEC and W-2 with the IRS or SSA, whether filed electronically or by mail.
For certain 1099-MISC types, other due dates may apply depending on the type of income and filing method.

Tip: Deadlines may fall on weekends or holidays, and the IRS may adjust filing expectations slightly, so always verify the current year’s official guidance.

Tax Season Preparation Checklist

Getting ahead now can save valuable time and headaches later. Here is what you can start doing today.

Gather Worker Information

Employees should have completed Form W-4s on file with accurate names, addresses, and Social Security Numbers. Contractors should complete Form W-9s, so you have their legal name, address, and Taxpayer Identification Number.

Review Your Payroll Records

Double-check total wages paid to employees and payments to contractors to ensure accuracy. Make sure all payments that require reporting are captured in your payroll or accounting system.

Confirm Worker Classification

Review how each worker is classified as an employee or contractor. The IRS considers factors like behavioral control, financial control, and the relationship between the parties when making determinations.

Update Your Systems

Now is the best time to verify direct deposit setups, mailing addresses, and payroll data to ensure forms are delivered without delay.

Plan for State Filings

Some states require additional filings for W-2s or 1099s. Check state requirements and deadlines to remain compliant across all jurisdictions where you operate.

How GMS Helps You Prepare and Stay Compliant

Preparing for tax season is easier with the right support. GMS helps businesses navigate W-2 and 1099 reporting by combining experienced payroll professionals with technology designed to improve accuracy and reduce compliance risk.

Our payroll experts assist with worker classification, payroll data review, and timely federal and state filings, helping businesses avoid costly errors and penalties. With GMS Connect, employee and contractor information is centralized, calculations are automated, and W-2s and 1099s can be securely filed and accessed without last-minute stress.

Beyond payroll, GMS provides ongoing support across HR compliance, benefits administration, and workforce management. By simplifying administrative responsibilities and keeping compliance on track year-round, GMS helps business owners head into tax season with confidence.