W-2 vs.1099: What’s the Difference Between the Tax Forms? 

how to file taxes with a W-2 and 1099

In America, businesses must annually report employee payments to the IRS using either Form W-2 or Form 1099 NEC. Depending on your type of employment, you may receive one or both tax forms – particularly if you work multiple jobs or have multiple income streams. Here’s everything you need to know about these forms, so you’ll be all set when it’s time to file your tax return. 

What’s the difference between a W-2 and a 1099-NEC? 

A W-2 and a 1099 are two very different tax forms, but they basically do the same thing: Both forms show how much money you’ve earned for work you’ve done during the year. Your employment type will determine which form you’ll receive at tax time.  

For example: 

When you work at a salaried or hourly job as a regular employee, you will receive a Form W-2, Wage and Tax Statement. Your employer should send one copy of the form to you and one to the IRS, reporting your wages and total tax withheld from those wages.   

Form 1099-NEC is used to report compensation paid to non-employees. This includes contract workers (self-employed) and anyone who is paid for performing work but is not technically an employee. So, if you do freelance work or are a sole proprietor, you can expect to get a 1099 from any client who paid you over $600 in one year.   

Check out the chart below to get a full picture of the differences between these two common tax forms. 

 Form W-2 Form 1099 
Who it’s issued to Payroll employees – a copy is also sent to the Social Security Administration (SSA) Non-employees, like independent contractors and freelancers 
Purpose Used to report an employee’s taxable compensation and tax withholding Used to list gross payments made to independent contractors 
Tax information reported Federal and State income, FICA, and withholding for employee benefits None 
Employer filing deadline Jan. 31 Jan. 31 

What is a 1099?

Two of the most common 1099s are the 1099-NEC and the 1099-MISC. 

Form 1099-NEC reports the gross payments you received plus any taxes withheld throughout the year. This form is typically sent out to independent contractors who made over $600 and people who made money in less traditional ways throughout the year. 

A 1099-MISC is the tax form used to report miscellaneous income like prize money and royalties. 

What is a 1099 worker? 

1099 workers include independent contractors and self-employed individuals. Here are some examples of people in professions who may receive a 1099-NEC to file their taxes: 

  • A plumber contracted to repair leaks for an office building several times throughout the year. 
  • A freelance graphic designer who gets paid by assignment. 
  • A consultant brought on to work for a company for a set time period. 

If these descriptions sound like your employment situation, you’d be considered a 1099 worker. If you expect to owe more than $1,000 in taxes throughout the year, or your withheld income and refundable credits are less than 100% of your 2023 tax liability, you must make quarterly estimated payments.  

To get a full list of important tax deadlines for 2024, read When Are Taxes Due in 2024? Tax Deadline & Due Dates 

What is a W-2?  

Form W-2 is a wage statement completed by your employer and given to you to file taxes if you are a salary or hourly employee. This form reports your annual gross income, plus what was withheld for tax purposes. 

What is a W-2 employee? 

W-2 employees typically have salary or hourly jobs. You’ll know if you’ll receive a W-2 if you had to complete Form W-4 when you started your current job. This tax form tells your employer how much of your income to set aside for state and federal taxes, ideally, so you won’t owe income tax when you file.  

Why did I get a 1099 instead of a W-2? 

If you receive a 1099-NEC, it means the organization that pays you (i.e. a business, a client, etc.) considers you an independent contractor for tax purposes. You’ll need to pay your income and self-employment taxes since none of these amounts are withheld from paychecks throughout the year.   

The IRS lists factors that determine whether you are an employee or a contractor.   

  1. Behavioral Control: Does your employer control how you do your job?  
  1. Financial Control: Does your employer pay for the tools needed to perform your job? Do they reimburse your job-related expenses?  
  1. Type of Relationship: Do you have a written contract with your employer? Do you receive benefits? Is your contract longer than one project?  

If you answered yes to most of these questions, then you should be classified as an employee and get a W-2 at tax time. If you answered no, then you should be classified as a contract worker and get a 1099-NEC.   

Is W-2 income taxed the same as 1099 income? 

No, W-2 income will be taxed differently than 1099 income in a couple of important ways.  

First, as a W-2 employee, you only pay 7.65% of your FICA tax out of pocket. Your employer is responsible for the other 7.65%. The other major difference is that your employer withholds tax from your paycheck to cover your tax liability all year long. 

As a 1099 worker, there are no income taxes withheld from your paycheck, so you’ll be responsible for calculating and paying your full tax liability when you file your tax return. You’re also responsible for paying your entire 15.3% FICA tax, also called the self-employment tax. This tax should be paid as quarterly estimated payments throughout the year. 

Can I receive a 1099 and a W-2 from the same employer? 

Technically yes, you can receive both forms from the same employer. But this is rare. An example might go something like this: 

Say you work a regular 40-hour week as a traditional employee. You’ll receive a W-2 at the end of the year for that job. But if you also performed work that differs from your own job, like cleaning the office on the weekend or being on a committee for a work-related event, then you might receive a form 1099-NEC for that extra work. 

When will I get my 1099?  

Employers are required to send you a 1099 by January 31st of the year after you worked for them. However, unlike a W-2, you don’t need a Form 1099 to file your return. You can report your income from your contract jobs by yourself. This is why it is especially important to keep your own earnings and expenses records. The only 1099 form you need to ask for if you don’t receive it is Form 1099-R.

Read also: How to File Your Taxes Without a W-2 

Do I have to pay self-employment tax for my side gig? 

It depends. If you receive a Form 1099, the IRS is considering you self-employed, and you’ll be expected to pay the self-employment tax.

For more information, read Are You Self-Employed? Here’s How to Tell

Can I file a 1099 and a W-2 together on the same tax return?  

Yes, TaxSlayer Self-Employed lets you enter both types of income on the same tax return. It also includes all the schedules you’ll need to calculate your tax bill and report your self-employment expenses.  

Simply follow the step-by-step instructions in the program. Your info will be automatically entered into the correct forms and schedules, and the calculations will be done for you. Once your return is complete, you’ll submit all the forms, schedules, and any other necessary documentation to the IRS. 

Can I file multiple 1099s and W-2s on the same tax return?

You can; in fact, the IRS requires it. You may receive several tax forms if you worked multipole jobs throughout the year. You should report all your income on IRS Form 1040.

TaxSlayer makes it easy to report additional W-2s, just select the “Add a W-2 Wage Statement” button to add more forms. If you have multiple 1099s, you must use Schedule C to calculate your earnings from self-employment.  

Can I deduct my self-employed expenses if I have 1099 and W-2 income?  

Yes, your self-employed business expenses are deducted directly from your income on Schedule C. But remember, if you deduct your expenses, you must be able to show that they are for specific business purposes—so it’s important to keep receipts and organize your records.  

You generally can’t deduct work-related expenses for your W-2 job. 

Does having two jobs increase or decrease my refund? 

In general, you could expect a refund if you had more income withheld than you owe for taxes. But it’s important to note that, if you’re getting a 1099, none of that income has been withheld to cover your tax liability. That’s why self-employed taxpayers usually don’t receive a refund.  

Your W-2 job might be able to help. Since your employer can and will withhold money from your paycheck for taxes, consider increasing your withholding amount to cover what you owe for your self-employment tax. This will help ensure that you don’t have a surprise tax bill at the end of the year. 

Note: Typically, when you enter your first form of income into your return, your refund is inflated due to the standard deduction being withheld from that amount. When you enter your second income, it reduces your refund because the standard deduction only applies once. But this is not actually increasing or decreasing your refund. 

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