In the United States, income is mainly reported in two ways: through a W-2 form or a 1099-MISC form. The form you receive depends on how you were hired, either as an employee or as an independent contractor. At the end of the year, the person or company that hired you is required to provide the appropriate form so you can file your tax return.
The W-2 form is issued to individuals who worked as employees and were part of a company’s payroll. Its main feature is that it includes tax withholdings. Throughout the year, the employer withholds federal income tax, Social Security, and Medicare taxes before paying wages. When filing your tax return, the W-2 shows the IRS how much you earned and how much was withheld, determining whether you are owed a refund or need to pay additional taxes.
The 1099-MISC form is issued to independent contractors or self-employed individuals. These workers are not on a payroll and provide services independently for specific projects. The key characteristic of the 1099-MISC is that no taxes are withheld. The form reports the total income received during the year, and it is the contractor’s responsibility to calculate and pay the appropriate taxes when filing with the IRS.
It is important to note that these are not the only income-related forms. Other sources of income, such as investments, pensions, or interest, may generate different forms that must also be reported accurately.
At Calidad Insurance, we are ready to guide and assist you in preparing your taxes correctly, helping you maintain a clean and accurate record with the IRS. Visit us and bring all your questions and concerns.
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