Ever wonder what the difference between a 1099 Form and W-2 Form is? Well, you are definitely not alone because most people don’t know the difference, since there are so many tax forms that it is so easy to get confused. W-2 Forms are for employees and include information about tax withholding, payments to the IRS and state taxing authorities. 1099 Forms on the other hand, show the reported payments to independent contractors. Both forms are submitted to the IRS in February for review.
It is very important to correctly identify your company, as well as yourself, as either the employee or the independent contractor. This is important because the IRS will audit you if you unintentionally make an error. Furthermore, you may also get sued by the other party (either employee or employer) who will claim that you misclassified them as “employers” when they were in fact “employees”.
Another helpful form is the 8919 Form that is available on the IRS website. Some people who file a W-2 might need a 8919 Form, so it important to understand what the form is and why the IRS might require you file it along with your W-2. With an IRS Form W-2, the IRS is recognizing you as an employee who has had deductions with every paycheck. With independent contractors, there are no deductions therefore they will owe the IRS money. These tips scratch the surface of what you need to know before you file your W-2 and 1099 Forms. It is fundamental that you seek a professional opinion if you are unsure what form you need to file and what supporting documentation you need to make sure you file correctly.