W-2

A W-2 is a tax form employers must issue to employees at the end of each year. It reports the worker’s wages, tips, and other compensation, along with all taxes withheld—federal, state, Social Security, and Medicare.

For home improvement contractors, a W-2 signals one thing: this person is your employee. That means you control how, when, and where they work. You supply the tools, set the schedule, and oversee the job. As the employer, you’re responsible for payroll taxes, workers’ compensation, unemployment insurance, and proper withholding. Misclassifying an employee as a 1099 can lead to IRS penalties, state fines, and DCWP compliance issues.