Written by Dwaine Cook and Regina House.

As a major public institution and one of North Carolina’s largest employers, NC State University manages a massive volume of tax reporting each year. For faculty, staff, students and vendors, understanding the distinction between W-2s and 1099s is the first step toward a smooth tax season. With the recent passage of federal legislation and updates to North Carolina’s tax code, the 2025 tax year brings several significant changes that will affect your filings in early 2026. 

The University Controller’s Office Tax Compliance Department is dedicated to keeping the campus community informed of these updates. To navigate these updates, employees should refer to the Payroll Guide for Employees as a comprehensive resource for understanding their W-2 information and ensuring their records are up to date.

The Core Distinction: W-2 vs. 1099

The primary difference between a W-2 and a 1099 is the nature of the relationship between the university and the worker.

Feature	Form W-2 (Employee)	Form 1099-NEC (Contractor)	Form 1099-MISC
Worker Status	Full-time, part-time or student employees	Independent contractors and consultants	Prizes and awards, lessors, legal settlements, some stipend payments and medical payments
Tax Withholding	Income tax, Social Security and Medicare are withheld	No taxes are withheld; the worker pays self-employment tax.	No taxes are withheld, and the recipient does not pay self-employment taxes.
Behavioral Control	The university directs when and how work is performed	The contractor determines their own methods and schedule	None
Benefits	Often eligible for state retirement and insurance	Not eligible for university benefits	Not eligible for university benefits

NC State Volume and Reporting Updates

NC State’s payroll and vendor reporting environment is complex, driven by a diverse workforce and extensive research partnerships.

W-2 Reporting Update

• NC State processes over 18,000 W-2 forms annually, covering faculty, staff and a high volume of student workers.
• The University Controller’s Office (UConO) released a new Payroll Guide for Employees in late 2025 to streamline compliance.

1099 Update

• The UConO typically processes over 3,000 1099s each year for vendors paid through University Accounts Payable.
• The university uses PaymentWorks to manage supplier information. This system automates Taxpayer Identification Number (TIN) matching with the IRS, which has significantly reduced the trend of “B-Notices” (mismatches) and associated penalties.

Significant Changes for 2025

The 2025 tax landscape has been reshaped by the “One Big Beautiful Bill Act” (OBBBA) and adjustments to North Carolina’s state tax rates.

Federal Changes (OBBBA)

• New Schedule 1-A: A new attachment to Form 1040 has been created for 2025. It allows taxpayers to claim specific new deductions, including those for qualified tips and overtime pay.
• 1099-K Threshold Reset: The IRS has reset the reporting threshold for third-party networks (such as Venmo or PayPal) to $20,000, with a minimum of 200 transactions for 2025. 
• Digital Assets: The IRS has introduced the new Form 1099-DA for reporting proceeds from digital asset (cryptocurrency) transactions.

State of North Carolina Updates

• Rate Reduction: The NC individual income tax rate has dropped to 4.25% for the 2025 tax year (down from 4.50% in 2024). Looking ahead, this rate is scheduled to decrease further to 3.99% in 2026.
• State Unemployment Tax Act (SUTA) Wage Base: The North Carolina Unemployment Tax Wage Base increased to $32,600 for 2025. While this is an employer-side cost, it reflects the rising cost of labor management for the university.

Key Deadlines for the 2025 Tax Year

Because January 31, 2026, falls on a Saturday, the deadlines for furnishing 2025 forms have been slightly extended:

• February 2, 2026: Deadline for NC State to furnish W-2s and 1099-NEC and 1099-MISC forms to recipients.
• March 31, 2026: Deadline for electronic filing of 1099-K forms.
• April 15, 2026: Individual income tax return filing deadline.

Tip for Employees

NC State employees are encouraged to consent to electronic delivery of their W-2 via the MyPack Portal. This ensures you receive your form as soon as it is generated, typically well before the February mail deadline.