Form 1099-MISC VS Form W-2
There are certainly a lot of businessmen who have their own workers wherein they pay these workers in exchange of their service, however, the most important thing that a business owner must know especially if that specific business owner has people who needs to be paid is that, there is a critical difference between a Form 1099-MISC and a Form W-2.
Form W-2 is 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. How To Calculate Tax On 1099-MISC Income?
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. Make sure to check out this website at https://en.wikipedia.org/wiki/Value-added_tax and know more about taxes.
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. There are definitely a lot of difference between a Form 1099-MISC Tax and a Form W-2 because the latter form is being issued to an employee regardless of the wages that he or she receives. A Form W-2 must be given to an employee no matter how long or short the employee have worked, considering that there are instances where an employee could only work for worth $50 yet that employee can still receive a Form W-2. The Form W-2 can be given to an employee even if the employee just earned $50 from her or his work, however, the case is different with the Form 1099-MISC because the recipient must work for at least $600 in a non-employee compensation during that year.
A 1099-MISC that is issued to an independent contractor typically reports only one dollar amount - the total annual payments made to that individual. It is really important not to withheld taxes for those payments. Specifically speaking, an individual contractor is a self-employed individual who is liable of solving for her or his taxes.