Learn the differences between a 1099 and a W-2 tax form

Your W-2 form: the basics

You will receive a W-2 form if you are an employee. The IRS requires your employer to record your salary and tax information and report it to you on a W-2. The form shows how much money you earned from that employer during the year, which you can use to calculate your Adjusted Gross Income, or AGI. The form also shows your tax deductions for the year, including federal and state taxes.

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Essentially, the W-2 will give you an idea of ​​how much you have been paid and how much you have already submitted to the IRS and your state for taxes.

Your 1099 form: the basics

Form 1099, on the other hand, records income you received as an independent contractor or for another source of income. For example, if you are self-employed or own your own business, you will likely receive multiple 1099 forms from your clients. The IRS requires businesses to issue a Form 1099 if they paid you at least $600 that year.

Depending on your earning activities, you may receive different 1099 forms to track your income. For example, you might receive a Form 1099-K, which is used for payments through settlement entities (like PayPal) to record your business transactions for the year. Use the sum total of your 1099 forms to calculate your total income and AGI.

As part of the US bailout, changes have been made to Form 1099-K reporting requirements for third-party payment networks such as Venmo and Cash App that process credit/debit card payments or payment transfers electronics. The change begins with transactions beginning in January 2022, so it does not affect 2021 taxes. Beginning with the 2022 tax year, if a person receives payment for goods and services through a third-party payment network, its income will be reported on Form 1099-K if $600 or more has been processed, as opposed to the current Form 1099-K reporting requirement of 200 transactions and $20,000. This change could impact people working in the gig economy, online sellers, independent contractors and other independent business owners.

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Where 1099 forms differ from W-2 forms is in tax withholdings.

Therefore, your Form 1099 will not show the taxes you have already paid to the government, only the income for each client.

Use W-2 and 1099 forms to file your taxes

Filing your taxes is simple whether you received W-2s, 1099s or both. Compare the income information on both forms with your records for accuracy. If you file your taxes with TurboTax, you’ll have the ability to save or import your W-2 form immediately and easily search each of the other Form 1099 options.

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