Monday, February 24, 2014

Tax Time: Forms Overview (What's the difference between a W-2 and a 1099??!)

After the year ends, the tax forms start coming in. But what are they each for? The numbering/naming system isn't terribly self-explanatory, so we thought we'd take a crack at giving an overview on what the most common forms are.



Let's talk about the forms you receive in the mail. Since both you and the government are sent copies of these forms, most serve the purpose of providing both you and the government with information that you should put on your tax return and that the government should expect to see. It serves as an official record/helpful input for you and a data for the IRS to check your return against. (Check out the sources below for more detail.)

W-2: Your employer sends a copy of this form to you and one to the government (federal and state). It summarizes how much money you earned during the year, how much was withheld for taxes, etc. This is helpful to you because it shows you the summary numbers to input into your tax return. It's helpful for the government, because it gives them numbers to check your tax return against. If you worked at multiple companies, you'll receive multiple W-2s.

1099-MISC: If you're an independent contractor instead of an employee, you'll get a 1099-MISC instead of a W-2 summarizing your income and withholding. The person paying you money should give you a 1099 if they paid you more than $600 during the year. If you worked for multiple companies/people, you'll receive multiple 1099s.

1099-DIV: This summarizes the total dividends received for the year.

1099-INT: This summarizes the total interest received for the year.

1099-B: This is technically for "Proceeds from Broker and Barter Exchange Transactions." So if you sell a stock, this form will outline any gain or loss from that transaction. More on that for another day (if enough people ask for it).

1098 Mortgage Interest Statement: 1099s are for income. The world of 1098 is for things that you could potentially deduct on your tax return... Like the aptly named 1098 Mortgage Interest Statement which shows (guesses anyone?) how much mortgage interest you paid during the year.

1098-C: You should get one of these if you donate a vehicle worth more than $500 to a tax-exempt organization.

1098-E: This shows how much interest you paid on student loans. Many people can deduct this even if they take the standard deduction, so check if you can too!

1098-T: This shows how much you paid in tuition for post-secondary education. Deductions and credits for education related expenses exist, so maybe we'll explore this in more detail in another post. But in the meantime, don't forget to check if you qualify for a credit or deduction for education expenses paid.

Want to know more about taxes??? Check out these posts.

Tell us-- Any other random forms you've gotten in the mail you want some background on?


 Share-- When do you plan on filing your taxes? Soon, just before April 15, or October?

Sources:


2 comments:

  1. I just filed my taxes this past weekend!! And it wasn't as bad as I thought. This was my first year filing a 1099-MISC, and paying estimated quarterly payments SAVED me!! I'll just have to say the self-employment tax sucks, but because I was prepared and paid throughout the year I only owed an additional $100 (which could've been a lot worse!!!).

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    Replies
    1. Yay for being done! And way to be on top of your quarterly payments. Nothing is worse than having a huge amount due (plus penalties) come April 15!

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