W2 or C2C: what is the difference?
In W2 vs C2C, W-2 means the worker is an employee, paid through payroll with taxes withheld. C2C, corporation to corporation, means the worker contracts through their own company. The two carry different tax and benefit rules. Check which applies before you accept an offer, since it changes your tax paperwork.
How the IRS decides who is an employee
The IRS looks at the whole relationship, not the label in a contract. It groups the evidence into three categories of common-law control:
| Category | Question |
|---|---|
| Behavioral | Does the company control, or have the right to control, what the worker does and how? |
| Financial | Does the payer control the business side, such as how pay is set, whether expenses are reimbursed and who provides tools? |
| Type of relationship | Are there written contracts or employee-type benefits, will the work continue, and is it a key part of the business? |
What changes in practice
- Employee (W-2). The employer withholds income tax, Social Security and Medicare from pay, pays its own share of Social Security and Medicare, and pays unemployment tax.
- Contractor. The payer generally does not withhold or pay those taxes. The contractor handles their own taxes and, on C2C, invoices through their own company.
Questions to ask before you accept
- Is the offer W-2 or C2C, in writing?
- Who handles taxes and benefits such as health coverage and leave?
- If you are on a work visa, does the arrangement fit the terms of your status? Ask your attorney before you sign.
- Are you free to take other clients, set your own hours and use your own tools? If not, the label may not match the reality.
Example
An IT contractor may be offered either; ask the visa and tax implications first.
Related terms and guides
Sources
- IRS, About Form W-9, https://www.irs.gov/forms-pubs/about-form-w-9, live official page, linked for readers; link accessed 31 October 2026, facts in this entry checked against it
- IRS, Independent contractor (self-employed) or employee, https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee, accessed 31 October 2026
This is general information, not legal, tax or immigration advice. Rules change and your situation may differ. Consult a licensed attorney or qualified adviser.