w2/1099 taxes

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There are a variety of different 1099 tax forms, with the term referring to any tax document that reports on an individual’s income other than that paid by their employer in the form of a regular salary. This income is reported on in W-2 form at the beginning of the following year.
The different types of 1099 tax forms can include:

Form 1099-MISC: Independent Contractor Income

If you’re an independent contractor, freelancer, or self-employed, you will receive a Form 1099-MISC from every business or individual who paid you more than $600 in the previous year.

Form 1099-DIV: Interest and Dividends

If you receive interest or dividends on stock investments or mutual funds, you will receive a Form 1099-MISC that reports on this income. This form is independent of the form you receive from making or losing money by buying or selling stocks, which is a Form 1099-B.

Form 1099-G: Government Payouts

If you receive payments from the state or federal government over the course of the year, usually in the form of unemployment checks or tax refunds, you will receive a Form 1099-G.

Form 1099-C: Debt Cancellation

If a creditor cancels a portion of your debt that you no longer owe, you will receive a Form 1099-C that reports on that amount as taxable income.

Form 1099-R: Retirement Account Withdrawals

If you withdraw money from your retirement account prior to officially retiring, that is considered taxable income, and you will receive a Form 1099-R will show the amount of the withdrawal that is taxable.

Among the most common recipients of the Form 1099 are independent contractors or freelancers. With more than 57 million Americans who reported that they freelanced in 2017, including 50% of millennials, it’s a growing employment trend. In fact, trends estimate that the majority of the American workforce will be freelancing by 2027. So before we continue, let’s make sure we’re all on the same page about the difference between employees – whose income is reported using Form W-2s — and independent contractors, whose income is reported using Form 1099s.

How to Fill Out a 1099 Form

Businesses owners must submit a Form 1099-MISC at the end of every year for every independent contractor they made payments of more than $600 to. When you discuss a contract with an independent contractor or freelancer, if you know you will pay them $600 or more over the course of the year, make them fill out a Form W-9 so you have access to their Taxpayer Identification Number (TIN) so you can fill out and remit them a Form 1099 at the end of the year for their tax purposes and for your business’. Then, you’ll have the information needed to fill out a Form 1099.

Fill out Form 1099s with tax information of the contractor and your business.

Using the information from the Form W-9 the contractor originally filled out and your business’ own tax information, fill out the Form 1099 with the contact information and TIN for both the contractor and your business, along with the total amount you paid the contractor in Box 7, labeled “Non-employee compensation.”

File forms with each independent contractor and the IRS.

Send Copy B of the Form 1099 to the contractor no later than January 31st. Next, file Copy A of the Form 1099 with the IRS no later than March 31st. Finally, keep Copy C of the Form 1099 for your records. Repeat this process for every independent contractor you worked with over the course of the year. If you’re not sure which people and businesses you work with qualify as independent contractors, you can consult this list of guidelines for figuring out how many you should fill out before the deadline.
Now you know how Form 1099s are used to pay and tax independent contractors and freelancers. To learn more, read about how to fill out a W-4 form next.

General Instructions for Forms W-2 and W-3

Who must file Form W-2.

You must file Form(s) W-2 if you have one or more employees to whom you made payments (including noncash payments) for the employees’ services in your trade or business during 2018. Complete and file Form W-2 for each employee for whom any of the following applies (even if the employee is related to you).

  • You withheld any income, social security, or Medicare tax from wages regardless of the amount of wages; or
  • You would have had to withhold income tax if the employee had claimed no more than one withholding allowance or had not claimed exemption from with holding on Form W-4; or
  • You paid $600 or more in wages even if you did not withhold any income, social security, or Medicare tax.
Only in very limited situations will you not have to file Form W-2. This may occur if you were not required to withhold any income tax, social security tax, or Medicare tax and you paid the employee less than $600, such as for certain election workers and certain foreign agricultural workers. See Election workers and Foreign agricultural workers, later.
Unless otherwise noted, references to Medicare tax include Additional Medicare Tax.
If you are required to file 250 or more Forms W-2 or want to take advantage of the benefits of e-filing, seeE-filing.

Who must file Form W-3.

Anyone required to file Form W-2 must file Form W-3 to transmit Copy A of Forms W-2. Make a copy of Form W-3, keep it and Copy D (For Employer) of Forms W-2 with your records for 4 years. Be sure to use Form W-3 for the correct year. If you are filing Forms W-2 electronically, also see E-filing.

Household employers

Even employers with only one household employee must file Form W-3 to transmit Copy A of Form W-2. On Form W-3 check the “Hshld. emp.” checkbox in box b. For more information, see Schedule H (Form 1040), Household Employment Taxes, and its separate instructions. You must have an employer identification number (EIN). See Box b Employer identification number (EIN)
Who may sign Form W-3. A transmitter or sender (including a service bureau, reporting agent, paying agent, or disbursing agent) may sign Form W-3 (or use its PIN to e-file) for the employer or payer only if the sender satisfies both of the following.
  • It is authorized to sign by an agency agreement (whether oral, written, or implied) that is valid under state law; and
  • It writes “For (name of payer)” next to the signature (paper Form W-3 only).

Extension of time to file Forms W-2 with the SSA

You may request only one extension of time to file Form W-2 with the SSA by submitting a complete application on Form 8809, Application for Extension of Time To File Information Returns. Include a detailed explanation of why you need additional time. You must sign the application under penalties of perjury. Send the application to the address shown on Form 8809. You must request the extension before the due date of Forms W-2. If the IRS grants your request for extension, you will

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have an additional 30 days to file. The IRS will grant extensions to file Forms W-2 only in limited cases for extraordinary circumstances or catastrophe, such as a natural disaster or fire destroying the books and records needed for filing the forms. No additional extension of time to file will be allowed. See Form 8809 for details.

Mail your letter on or before the due date for furnishing Forms W-2 to employees. It must include:
  • Your name and address,
  • Your EIN,
  • A statement that you are requesting an extension to furnish “Forms W-2” to employees,
  • YThe reason for delay and
  • Your signature or that of your authorized agent.
Requests for an extension of time to furnish Forms W-2 to employees are not automatically granted. If approved, an extension generally will be granted for no more than 15 days from the due date, unless the need for up to a total of 30 days is clearly shown. See the 2018 General Instructions for Certain Information Returns.

Undeliverable Forms W-2

Keep for 4 years any employee copies of Forms W-2 that you tried to but could not deliver. However, if the undelivered Form W-2 can be produced electronically through April 15th of the fourth year after the year at issue, you do not need to keep undeliverable employee copies. Do not send undeliverable employee copies of Forms W-2 to the Social Security Administration (SSA).

Taxpayer identification numbers (TINs).

Employers use an employer identification number (EIN) (XX-XXXXXXX). Employees use a social security number (SSN) (XXX-XX-XXXX). When you list a number, separate the nine digits properly to show the kind of number.

Do not accept an IRS individual taxpayer identification number (ITIN) in place of an SSN for employee identification or for Form W-2 reporting. An ITIN is available only to resident and nonresident aliens who are not eligible for U.S. employment and need identification for other tax purposes. An ITIN will expire if it is not used at least once on a federal tax return in the last three consecutive tax years, either as the filer or a dependent. ITINs issued before 2013 are scheduled to expire according to an annual schedule. For more information, see the Instructions for Form W-7 or visit IRS.gov/ITIN. You can identify an ITIN because it is a 9-digit number formatted like an SSN beginning with the number “9” and with a number in one of the following ranges in the fourth and fifth digit: 50–65, 70–88, 90–92, and 94–99 (for example, 9NN-70-NNNN). Do not auto populate an ITIN into box a, Employee’s social security number, on Form W-2. See section 4 of Pub. 15 (Circular E).