Do Interns Get a W2 or 1099? Tax Status Explained

Internships offer valuable professional experience and often involve compensation. Understanding how this compensation is handled for tax purposes is important for interns, as it dictates the tax forms they receive and their filing obligations. The specific tax document an intern receives depends on their classification.

Understanding Worker Classification and Tax Forms

The Internal Revenue Service (IRS) distinguishes between two primary worker classifications: employees and independent contractors. This distinction determines how income is reported and taxed. An employee typically works under the direction and control of an employer. Employers generally withhold income, Social Security, and Medicare taxes from an employee’s wages.

For employees, businesses issue Form W-2, Wage and Tax Statement, by January 31st each year. This form reports the employee’s annual wages, tips, and other compensation, along with the amount of federal, state, and local taxes withheld. The W-2 form is essential for filing an individual’s income tax return, as it provides a clear summary of earnings and tax payments.

Conversely, an independent contractor generally offers services to the public and maintains control over how their work is performed. Businesses do not typically withhold taxes from payments made to independent contractors. Instead, independent contractors are responsible for paying their own self-employment taxes, which include Social Security and Medicare taxes, and estimated income taxes.

When a business pays an independent contractor $600 or more for services in a year, they are generally required to issue Form 1099-NEC, Nonemployee Compensation. This form reports the total nonemployee compensation paid. The 1099-NEC helps independent contractors report their income to the IRS and calculate their tax liability.

Determining Intern Employment Status

An intern’s classification for tax purposes depends on the nature of their relationship with the organization. Paid interns are generally considered employees, subject to payroll and tax withholding rules. They typically receive a W-2 form at the end of the year, similar to any other employee.

For internships that are unpaid, the determination becomes more nuanced. Federal labor laws, specifically the Fair Labor Standards Act (FLSA), guide whether an intern must be paid. The Department of Labor (DOL) uses a “primary beneficiary test” to assess if an intern is an employee entitled to minimum wage and overtime. This test determines if the internship primarily benefits the intern’s education or the employer’s operations.

Factors in this test include:
The extent to which the intern and employer understand there is no expectation of compensation.
Whether the training is similar to an educational environment.
If the internship is tied to the intern’s formal education program.
Whether the internship accommodates academic commitments.
Its duration is limited to beneficial learning.
If the intern’s work complements rather than displaces regular employees.
If the intern is determined to be the primary beneficiary, the arrangement can be unpaid, and no W-2 or 1099-NEC would be issued.

However, if an internship primarily benefits the employer and involves the intern performing work that would otherwise be done by paid employees, the intern may be considered an employee. Even if initially designated as unpaid, the intern may be entitled to minimum wage and overtime, and the employer would be required to issue a W-2. Misclassifying workers can lead to significant penalties for employers, including back taxes and interest.

Navigating Intern Tax Documents

If an intern receives compensation, they should expect either a W-2 or a 1099-NEC, depending on their classification. Paid interns classified as employees will receive Form W-2 from their employer by January 31st of the year following their internship. This form details their wages and the taxes withheld, which is necessary for filing their personal income tax return.

Interns paid as independent contractors, typically for specific projects or services where they control their work, should receive Form 1099-NEC if their earnings from a single payer total $600 or more. This form is also due by January 31st. Independent contractors are responsible for reporting this income and paying their own self-employment taxes.

For interns who were truly unpaid and whose internship primarily benefited their education, they will not receive a W-2 or 1099-NEC. If an intern believes they were misclassified or does not receive the expected tax form by the January 31st deadline, they should first contact their employer or the entity that engaged them. If the issue remains unresolved, the intern can reach out to the IRS for assistance or guidance on filing taxes. The IRS may provide a substitute form, such as Form 4852, to estimate wages and withholdings for tax filing.