According to a study by the Freelancers Union, over 53% of the U.S. workforce is involved in some kind of freelance work. And that number is expected to grow in the future. In addition,
many people work as an employee and also have their own business on the side, where they can generate side income. At this type of cases, you need to know the difference between a 1099-MISC and W-2. A Form 1099-MISC is the tax form you receive from a company you contracted with. A W-2 is the tax form you receive as an employee from your employer.
The major difference between these forms is the tax section. Companies do not withhold taxes for contractors, so the 1099 will include the full amount that was paid for you. On the other hand, companies withhold taxes on W-2 income for their employees; a W-2 will include your total earnings, plus how much was already withheld in taxes and sent to the government on your
Issuing these form is the most critical and oppressive process to all employer every year. You are almost guaranteed an audit or tax notice if you fail to report a Form W2/1099. Each Form W2/1099 is matched to your Social Security number, so the IRS can easily spew out a tax bill if you fail or incorrectly report any of them. It matters a lot, especially now that the IRS has six years to audit, not three.
Accountants on Air team of payroll specialists can help you avoid costly IRS penalties. Not only we handle the entire payroll process for you, we also ensure your taxes are calculated correctly and your tax payments and filings are submitted on time.