A Comparison of the 1040 and 1099 Tax Forms
Over 800 tax forms, ranging from individual paperwork to information returns, can be confusing and lead to queries. This covers the frequently asked query, “What is the distinction between Forms 1040 and 1099?”
This blog post will explain the distinctions between the 1040 and 1099 forms and provide thorough instructions on how to complete each.
What Is a Form 1040?
The most popular form used by taxpayers to submit their yearly tax returns is Form 1040. It entails filing income tax returns and figuring out tax obligations. Each year by the tax deadline, both employees and independent contractors are required to complete and submit a 1040 tax form.
Both employee (W-2) and freelance (1099) income must be reported on this form (1040). It informs you of both your debt and your expected repayment in full.
Each section of Form 1040 has a distinct function:
- Contact information – Taxpayers declare if they are single, or married. And, if so, whether they are filing jointly or separately. They also supply their personal information.
- Reporting additional income – This section contains a list of all of the taxpayer’s income, including both earned income (such as earnings and salary) and unearned income (such as dividends and interest) from sources like investments. Include any refunds, credits, or offsets as well.
- Report any unpaid taxes or refunds. The palace is the last portion when you pay whatever taxes you owe. If you owe money, you can decide whether you want it paid to you as a check or put immediately into your bank account.
Guidelines for Filling Out Form 1040
Utilize these excellent suggestions to assist you in completing your Form 1040 and avoiding costly errors.
Compile All the Necessary Documentation
You’ll need access to the necessary records for disclosing earned income, outlays, and deductions on your 1040 form, including your W-2, 1099s, donations, receipts, and so forth.
In addition to making tax filing simpler, keeping an organized paper trail will help you defend yourself in the event of a tax audit.
Recognize the Status of Your Filing
According to the IRS, “Your filing status is utilized to establish your eligibility for certain credits, the standard deduction, and your correct tax.”
Your eligibility for deductions, exemptions, and anticipated tax rates will all be significantly influenced by this. You normally have one of five alternatives when choosing your filing status:
- Filing jointly if married
- Filing separately after marriage
Qualifying Widower Head of Household Claim All Credits and Deductions
You should be aware of every credit and deduction you are entitled to.
Depending on your particular situation, they could be things like child tax credits, charitable donations, or work-related expenses. You can reduce your tax obligation by claiming all of the deductions and credits to which you are lawfully entitled.
If you have different sorts of income, tax credits, or tax deductions, you’ll need to attach other papers because the 1040 form is just brief.
Check Your Calculations Twice
Make sure to double-check your figures to ensure there are no mistakes before submitting your 1040. Referring to this manual on how to accurately complete form 1040 can be useful.
If errors are made, you can be subject to higher taxes or fines. You may confidently file your taxes if you carefully evaluate your work.
Pay Your Bills on Time
The deadline for filing taxes usually falls on April 15th. You can ask for a filing extension if you are unable to submit your income tax return by this deadline. But you will still be required to pay an estimate of any taxes due. How can you be sure it will be there on time?
- If you send your paperwork in the mail, be sure it is properly addressed, postage-paid, stamped, and delivered by the deadline.
- If you submit your paperwork electronically, you must do so before the deadline. The metadata and electronic files will include this information. The IRS will often send an email or text message to confirm receipt of your return and acceptance.
If a person earns more than a particular amount of money, they practically must fill out a form 1040. However, a person can also be required to complete a 1099. Especially if they receive non-employee income. A line on the 1040 form will eventually include the income declared on the 1099 form.
For instance, you could be obliged to utilize a 1099 form to declare your income. Especially if you’re self-employed or own a small business. This tax rate, which has grown to be a significant category as a result of the growth of the gig economy, also includes contracted labor, such as consulting or freelancing.
Independent contractors are now required to submit a 1099-NEC if they make at least $600 in self-employment or freelancing income per year.
The many forms of income that are unrelated to salary or wages are reported on a 1099 tax form. A 1099 comes in a variety of forms, including:
- Reports taxable interest income on Form 1099-INT
- Form 1099-DIV: Dividend income report
- Reports capital gains and losses on Form 1099-B
- Reports other types of revenue, such as royalties or rental income, on Form 1099-MISC.
- Even if you work for a salary, you could still need to complete a 1099. For instance, you can get a 1099-MISC form from your renters if you rent out an extra dwelling unit (ADU).
Advice on How to Complete a 1099
To save time, money, and any legal problems while filing your 1099 form, you should follow a few recommended practices.
Submit the Proper 1099 Form
It can be difficult to determine which 1099 type you require. This is because there are various sorts of 1099s. Understanding how to complete and submit the appropriate one is crucial.
You might just be required to complete one 1099 form. Or you might be required to complete several different forms, depending on your circumstances.
Make sure you received a 1099 form for any income you received besides salary or wages by checking again. Usually, that will come from the individual or business that paid you for your services. However, you are still required to disclose that income on your tax return even if you do not receive a 1099.
Avoid Deducting Personal Expenses
When you work independently, especially if you work from home, it can be difficult to distinguish between personal and company expenses. Can you deduct a phone or computer, for instance, if you use it for both work and personal purposes?
You might be able to deduct some of that. Only the portion used solely for business reasons may be written off.
Pay Taxes Quarterly
You are required to pay your federal income taxes every quarter if you are self-employed and owe at least $1,000 in back taxes. To that purpose, by the following dates in 2023, you must accurately estimate and pay your quarterly taxes:
- April 18, 2023
- June 15, 2023
- September 15, 2023
- January 16, 2024
Fines and penalties may apply if quarterly taxes are not paid. The majority of small businesses must also submit quarterly estimated federal tax payments.
Consult With Tax Professionals
No matter whatever form you choose (1040 and 1099), filing taxes is rarely an easy procedure, and figuring out your sources of income and deductions can be difficult.
To help with this, dial Your Part Time Accountant. We’ll pair you up with a tax professional who is knowledgeable about state tax laws and the specifics of your sector. We can spare you time and hassle while maximizing your tax savings, regardless of whether you have small business taxes or are a salaried employee.