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How to Differ Form 1099 and W2 Form? – Independent Contractors Vs Employees

Many taxpayers confuse themselves with 1099 form and W2 form as both the forms serve a different purpose for workers. Federal Income Tax forms 1099 and W2 are used to report an individual’s income which is earned from various sources throughout the financial year. But each form is issued under different scenarios and it requires different approaches when you file federal income taxes. If you are an independent contractor, you must file 1099-MISC Form; if you are an employee you must file W-2 Form with IRS. This article brief you the basics of W2 form and 1099 forms, so that it avoids the misperception while you file the tax. 1099 and W2 Form - Independent Contractors Vs Employees

 

Form 1099 Vs W2 Form

About W2 Form

A Form W-2 is a Wage and Tax Statement, if you are an employee and receive a fixed salary or wage from your employer then you will receive Form W2. As per IRS, an employer must record their employee’s salary and tax information; in turn, report it to the employee on a W2 form. W2 Form contains the details of the employee’s earned income from the employer and this can be used in the calculation of the employee’s gross income. Also, it specifies the tax withholdings for the year which includes both federal and state taxes.

Form W-2 is due date

    •  -to your employee copy by January 31,
    • -Paper filing with IRS by February 28/29 and
    • -E-filing with the IRS by March 31.

About IRS 1099 Form

Form 1099 is used to hold the records of income that you receive as an independent worker while working for different sources. For instance, if you are a freelancer and working for multiple clients, then you may receive 1099-MISC Form from all the clients when they have paid you at least $600 during the financial year. An individual may receive different IRS 1099 series forms, depending upon their sources of income or money making activities.

Form 1099-MISC is due date

  • to your recipient copy by January 31,
  • -Paper filing with the IRS by February 28/29 and
  • -E-filing with the IRS by March 31.

How Independent Contractor Differs from Employees?

  • As a self-employed or freelancer or contractor, you must calculate your own 1099-MISC taxes and need to file and submit with the IRS before the 1099 due date on a quarterly basis.
  • As a W2 employee, payroll taxes automatically debited from your salary then paid to the IRS through your employer or organization on the yearly basis.
  • If you are not sure about whether you are hired by independent contractor or employee, you can able to submit SS-8 Form with IRS. IRS people will find your status based on provided information, keep it in mind this SS-8 Form will take 6 months to process and returned.
  • Form 1099-MISC reports income of prizes won, rent payments, fishing boat proceeds, and attorney fees of $600 or more.
  • Form W2 reports total income, social security, and Medicare income and shows how much amount has been withheld from employee pay for federal income taxes to state and local taxes.
  • 1099-MISC Form specifies only the income you received from the client but does not contain the information related to the taxes which you have paid to the government.

Stay with us for more tax tips with Etax1099, Compare your income information on both the forms and apply for it accordingly. Etax1099 helps you to file 1099 taxes comfortably.  If you have any queries give us a call or send us a live chat or 24*7 basis on weekends also. You can Email us at anytime support@tax2efile.com.

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