When it comes to paying a worker with exchange to the services that they give, it is really important for the business owner to know the difference between a Form 1099-MISC and a Form W-2 wherein both have critical differences with each other and both have differences when it comes to calculations.
It is really important for every business owner who gives money to their employees that a Form W-2 is only issued to employees at the end of the year. By January 31 of the following year, it is really important for business owners to remember that an employee must already receive the Form W-2. The Form W-2 should always be taken seriously because it has a lot of information which are very confidential, information with regards to every benefit that an employee can receive, that is why, it is really important for an employee to file her/his personal income tax return including gross wages, salaries and same goes to other compensations, moreover, the employee must also file her/his different tax withholdings like Medicare taxes, Local income taxes, State income taxes, Security taxes and retirement plan contributions.
A Form W-2 in indeed very important most especially when an employee prepares a federal or state personal income tax return. There are certainly a lot of things that an employee must do upon receiving the form, that is why it is really important that the Form W-2 must already be prepared ahead of time. Once an employee receives the W-2, he can file his tax return and get his long-awaited tax refund check from the IRS.
On the other hand, the Form W-2 is not the only one that should be issued to its recipients by the 31st of January, since the same case also goes to the Form 1099-MISC, however, the only difference is that, the form is not given to the employee, but rather to an independent contractor. Here’s another significant difference between W-2?s and 1099?s – a W-2 must be issued to every employee regardless of how much wages he/she received. Every employee who have worked for their money regardless of its quantity and regardless of the time that they have exerted on their work must receive a Form W-2. The case is definitely different with the Form 1099-MISC because the employee must really work worth $600 or more.
Another thing that every business owner must keep in mind is that, when it comes to issuance of Form 1099-MISC to an independent contractor, it has been known that there is only one dollar amount of the total annual payments made to that specific individual. Keep in mind that taxes should not be withheld for those payments at all cost. Specifically speaking, an individual contractor is a self-employed individual who is liable of solving for her or his taxes.
Lessons Learned from Years with Services
22 Lessons Learned: Services