To report income for employees of your company, use a Form W-2. This form reports total income, Social Security and Medicare Income, and it shows how much has been withheld from employee pay for federal, state and local taxes. W-2s are due to the employee no later than January 31. After you have completed and sent the W-2s, you must then collect all of the W-2s for your employees and send those, along with a compilation called a W-3, to the IRS by February 28.
To report income for independent contractors, use a Form 1099-MISC. Independent contractors are those individuals who do work for your company but who are not employees. You don't report withholding or Social Security/Medicare wages because you don't withhold income taxes for independent contractors and you don't deduct Social Security and Medicare from their payments. In the same manner as the W-3, you collect all 1099-MISC forms and send them to the IRS with a 1096 compilation form.
