How to File Taxes with A 1099 and W-2
It’s tax season! If you earn money both as an independent contractor and an employee, your taxes are going to be a bit more complicated this year because you’ll be filing with a 1099 and W-2. Here’s what you need to know.
What’s the Difference Between a 1099 and W-2?
First things first: as a freelancer and employee, you should’ve received two different forms before tax season hit.
1099 workers are also known as freelancers, contractors, or consultants. When companies hire 1099’ers, they report their payments to the IRS on the Form 1099-K or 1099-MISC. They do not withhold taxes for 1099 workers. That means the form will show the FULL amount you’ve earned, and taxes have not yet been sent to the IRS.
W-2 workers are also known as employees. They report their wages to the IRS on the Form W-2, Wage and Tax Statement. Companies do withhold taxes for their employees, so the W-2 form shows your total earnings AND how much of that income has already been sent to the government by your employer.
How Do I File Taxes With Both Types of Income?
Bringing in multiple forms of bacon? You’ll need to do some extra work, so keep these tips in mind when filing with a 1099 and W-2.
The 1040 form is your home base. The new “postcard-size” version of the 1040 form is where you’ll report your W-2 income, your self-employment income and tax, and more.
You need a Schedule C and Schedule SE, too. These forms help you report your self-employed income and are used to complete your 1040:
Schedule SE: Use this to calculate what portion of your self-employed income you owe for Medicare and Social Security taxes (these taxes are not withheld from 1099 earnings like they are from W-2 income).
Your taxable income includes both types of income. When calculating your total individual taxable income, you’ll report your 1099 profit (or loss!) along with your W-2 income.
You need to report your freelance income even if you didn’t receive a 1099. Companies don’t have to send you a 1099 if they paid you less than $600. You still need to pay taxes on that income, even if it’s small, so be sure to report it!
How much you can deduct depends on your income type. As a W-2 employee, expenses that you incur while on the job are not deductible (though you may be reimbursed by your employer). As an independent contractor, ordinary and necessary expenses related to your work are deductible as business expenses.
Your tax refund depends on how accurate your tax return is, not how many jobs you have. Because a tax refund is basically getting back your own earned income, it’s best to pay your taxes as accurately as possible; that way, you keep more of your own money up front to spend and earn interest on. Be sure you:
Don’t procrastinate. If you rush your tax return, you may make errors that keep you from getting a refund.
Make estimated tax payments during the year. Taxes aren’t withheld from 1099 paychecks like they are for W-2 workers, so you’ll owe quarterly tax payments if you’re self-employed. Don’t skip these – you could be fined!
Check your W-2 withholdings. It’s always a good idea to review every year how much your employer withholds for taxes. You want to be sure the right amount is being withheld every month!
Know your tax credits and deductions. Be sure to claim all the tax credits and deductions for which you are eligible. Otherwise, you will end up paying more taxes than you need to. Our Stride Tax app can help you accurately track your business expenses