THERE IS A DIFFERENCE? W-2 VS. 1099-MISC

Income is an exciting thing to have in life for who doesn't like making money? Yet, something subtle as in how you get paid can be often overlooked on the importance it can have on an individual, especially when it comes to taxes and what should be expected on their W-2 or 1099-MISC. For a quick summary and not diving in too deep.

W-2 forms are only for those who work under an employer. Each time they get paid a small portion is removed from how much they earned, whether it be salary or hourly, and is placed aside for taxes for Medicare, Social Security, Federal, and State taxes. The amount is set by a percentage and is set by the employee through a W-4 which can be viewed as tedious but is crucial when getting hired at a company.

1099-MISC, on the other hand, is for those who are somewhat like independent contractors or contracted labors who do a specific job or task and are paid through cash or checks. They are to fill out a W-9 that is given to the IRS to keep track of who was given a 1099-MISC. The major difference will be that 1099-MISC do not have taxes withheld and get their entire pay. However, this can be troublesome for now the liability to have those taxes paid will be up to the independent contractor to put away part of that pay into a separate account so once tax season rolls in they can easily pay back what is owed.

They both have good and bad qualities, but even if your career or job doesn't require this knowledge it is something to be on the lookout for if you ever decide to move companies, fix your W-4, or even start your own business.