Whether you work a regular full-time job or work from home as an independent contractor, Uncle Sam expects you to do your taxes. The process differs slightly depending on if you’re filing with a W-2 or 1099, so let’s get started.
How do 1099s work?
If you earned $600 or more in a year from a firm, you can expect to receive a 1099 in the mail. This is a document that gives you the exact figures you need to input in order to get your taxes done.
What makes being an independent contractor unique is that the IRS treats you as the same as your business. As sole proprietor, your profits and losses are listed right alongside your personal tax info.
What’s different about a W-2?
While form 1099 is sent to independent contractors, a W-2 form is sent to full-time employees. The key difference between the two is that while taxes are taken out of your paychecks as a full time employee, this is typically not done for an independent contractor. That means as an independent contractor you’ll have to set aside funds for taxes ahead of time.
Whether you’re a full-time employee or an independent contractor, you should be sure to itemize any deductions that might apply to you so that you can get a better refund. Additionally, by using online tools like TurboTax to guide you through the process, filing your taxes will be quicker and less painless, allowing you to get to that refund you’ve been looking forward to.
Finally, there are many different employment scenarios, so please consult with a tax professional well before your tax filings are due or with the IRS for details on 1099.