What Separates a W-2 Tax Form From a 1099 Tax Form

Which type of payment—a 1099 or a W-2—is preferable? Understanding the distinction between a 1099 tax form and a W-2 is crucial, whether you’re starting as an independent contractor or a new business owner. Use this blog post as a reference to comprehend each form, how they vary, and the duties associated with each.

What Is a Tax Form 1099?

A 1099 tax form can be used to track the money that both businesses and individuals send or receive. This form can be used by small enterprises to pay non-salaried contractors for work or services rendered.

There are 16 separate 1099 forms, each of which has a different commercial function. The most typical are 1099-NEC and 1099-MISC. These documents show the payment or receipt of money that is not taxable.

Who Fills Out the IRS Form 1099?

You must obtain, fill out, and distribute the appropriate Form 1099 to your non-salaried contractors. Especially if you are a business owner who has dealt with them. The IRS is the source of this form.

Factors to consider when filing IRS Form 1099:

  • The IRS must receive 1099s by a certain date. The deadline for the 2022 tax year is February 15, 2023.
  • You don’t have to issue 1099 for non-employee remuneration or miscellaneous funds. Especially if you paid them less than $600 during a tax year, albeit each single 1099 form has its restrictions.
  • Even when you file a 1099 with the IRS, the contractor is in charge of paying income tax on amounts shown on 1099; you are not liable for doing so.

How Soon Will You Get 1099?

Additionally, there is a deadline for firms to send contractors their 1099s. 1099s must be sent by January 31, 2023, for the 2022 tax year.

If you’re a contractor and you haven’t gotten your 1099 by this date, follow these instructions to get your form:

  • Contacting the payer – The company that is issuing your 1099 should be your initial port of communication.
  • Contacting the IRS – Get in touch with the IRS if you haven’t heard from the company by the time your income tax return is due. When you do receive your 1099, the IRS will give you instructions on how to submit it as well as how to file your income tax return.

You must obtain information from your contractor before the deadline if you want to submit a 1099 tax form as a small business. Be mindful of the tax concerns that 1099 workers may encounter if they are contract workers.

A W-2 Tax Form: What Is It?

W-2 tax forms are distributed by businesses to typical workers who received $600 or more in pay during a tax year.

Your paycheck likely had at least three regular deductions for withheld income tax, Social Security tax, and Medicare tax. Especially if you had previously worked as a standard salaried employee.

Your employer pays these taxes to the IRS on your behalf when they are withheld from your paycheck. And your company will give you a W-2 at the start of the following year that includes the information shown below:

  • Your gross and net pay for the entire tax year before last.
  • The total amount of federal income taxes, Social Security taxes, and Medicare taxes they paid throughout the year on your behalf.
  • You’ll utilize your W-2 to submit your income tax return for the prior tax year, much like a 1099 form.

Who Fills Out the W-2 Tax Form?

The information on your W-2 (and the taxes a business pays on your behalf throughout the year) will depend on important information from your W-4 tax form. Even though your employer will complete and give you a W-2 tax form.

In a W-4, often known as an employee’s withholding certificate, you can specify how much federal income tax should be deducted from each paycheck. The choice of how much of your income to withhold for tax purposes ultimately rests with you:

  • If you decide not to deduct any federal income tax (and you are not exempt from paying income tax), you will be required to pay the IRS your whole outstanding tax balance by the due date for filing your taxes.
  • You won’t owe the IRS your whole tax burden by the filing deadline if you just withhold a portion of your federal income tax.
  • You won’t have to pay anything at year’s end if you withhold an amount equal to or higher than the amount of federal income taxes you owe the IRS. The most frequent option for conventional workers is this one.
  • Although you’ll probably complete a W-4 when you’re hired, you should also complete a fresh W-4 if your tax situation changes.

When Can You Expect a W-2?

 

Employers must deliver W-2s to workers by a specific deadline, which varies annually, just like with 1099s. This deadline for the 2022 tax year is January 31, 2023.

If you don’t get your W-2 by the due date, much like with 1099s, you should:

  • Speak with your employer
  • If your employer fails to comply with your request or sends you a W-2 before the federal income tax filing deadline, get in touch with the IRS.

1099 vs. W-2: Differences and Similarities

Forms 1099 and W-2 share the same components:

  • Businesses use them to keep track of the prices they paid for goods and services.
  • If a person or organization receives 1099, they can utilize both forms, or even a mix of the two, to determine their overall tax obligation for the year.
  • The beneficiary must obtain both documents from the organization that made the payment. Or, if they are unsuccessful, contact the IRS.

However, there are a few significant distinctions to remember:

  • Traditional salaried employees often receive W-2s, whereas non-employees or independent contractors typically receive 1099s.
  • The majority of the time, the money stated on a W-2 has already been taxed. The majority of 1099 funds, however, are usually tax-free. Therefore, W-2 receivers are (often) already paid in full. Whereas recipients of 1099s would likely have a bill owing on tax day (or will receive a refund for overpayment).
  • While the IRS offers 16 different 1099 forms, there is only one type of W-2.

Tax Return Filing Using IRS Forms 1099 and W-2

Should I file a W-2 or 1099? Even though you may receive both W-2s and 1099s, you can utilize both to determine your overall income tax obligation for the year:

  • The “Income” portion of IRS form 1040 often contains information from W-2s.
  • Typically, Schedule 1 of form 1040 is used to calculate funds reported on 1099s. A distinct sort of 1099 is represented by each line in Schedule 1.

Simple Tax Filing with Your Part Time Accountant

The first step on your path, whether you’re a contractor or a business owner, is to grasp the advantages of 1099s vs. W-2s. However, there is still a ton of information to learn about forms and tax filing, which is where Your Part Time Accountant comes in.

Even the most complicated tax issues and forms will be handled by our tax pros. We can help you with everything from reasonable payroll to simple bookkeeping to doing your income taxes.