When filing a tax return, you need to report the income you earned throughout the year. If you’re a worker, you’re going to be issued a W-2 from your employer for the wage, salary, and other compensation paid to you during the course of the tax year. Even if you worked for a couple of days, you are going to be issued a Form W-2, Wage and Tax Statement. You will then use this form to file your federal income tax return.
On the other hand, Form 1099 is used for reporting various types of income paid to individuals and businesses. While there is only one Form W-2, there are 16 different types of Form 1099. These forms can report all types of income other than employment. For example, if you withdrew money from your retirement account, a Form 1099-R will be issued to you so you can report that income on your tax return.
Types of Form 1099
Although there are a total of 16 variations of Form 1099, most commonly, 1099-MISC, 1099-INT, 1099-DIV, and 1099-R are used. Another commonly used Form 1099 is the 1099-G which reports government payments such as unemployment claims.
- Form 1099-MISC reports miscellaneous income paid to unincorporated individuals such as freelancers and contractors
- Form 1099-INT reports interest paid to individuals and businesses from financial institutions
- Form 1099-DIV reports dividends and other distributions from investments
- Form 1099-R reports retirement income
- Form 1099-G report federal, state and local payments
Overall, there isn’t that much of a difference between Forms 1099 and W-2. The only difference is the type of earnings reported. While Form W-2 only reports wage, salary, and other compensation paid to employees, Form 1099 has much broader use. The workers can also receive Form 1099. In either way, both Form 1099 and W-2 is needed when filing a federal income tax return.
Since you will need these tax documents to fulfill your tax obligations, there is a deadline to file these forms. If these forms are not produced before January 31st, contact where you’re expecting them.