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I Got A 1099 And A W-2 In The Same Year: Can I File Them Together?
I Got A 1099 And A W-2 In The Same Year: Can I File Them Together?
Managed to turn your passion into a side hustle? Congratulations! As more and more Americans join the ranks of freelance workers and self-employed business owners, tax season can start to become a little more complicated. This is mainly because they find themselves dealing with a new tax form, the 1099, when they're only used to seeing a W-2 form from their employers.
Independent contractors should receive a 1099 form from every entity they do freelance work for. This could be a rideshare service they drive for or a company whose logo they design. This is different from a W-2 form that every employer sends to their employees.
Normally, you would not do W-2 and 1099 work for the same entity, and you should receive a W-2 form from your employer and a 1099 from another entity you might do contract work for.
The major difference between these forms is that a W-2 form shows money that's automatically withheld from an employee’s paycheck to pay for taxes, while a 1099 form does not, because the self-employed are considered to be both the employer and the employee.
As such, they're responsible for paying their own taxes. So, if you find yourself with both a 1099 and a W-2 form in the same year, you will need to include both income sources when filing your tax return.
When can you start filing taxes 2024? When is tax filing due? When is the last day to file taxes 2024? This guide will also answer these questions.
Table of contents
Key takeaways:...Read more
How does a 1099 form affect my taxes?...Read more
Is having a W-2 and 1099 in the same year useful?...Read more
When can you start filing taxes 2024?...Read more
I have a W-2 and a 1099, can I get the Qualified Business Income deduction?...Read more
What is the difference between W-2 and 1099 employees?...Read more
What is the difference between 1099 and W-2 taxes?...Read more
1099 vs W-2 forms...Read more
W-2 vs W-9 form...Read more
1099 vs W-2 work: which should I pick?...Read more
Key takeaways:
- You need to pay tax on both W-2 and 1099 income if you receive them both in the same year.
- You will only need to pay all the self-employment tax based on the income shown on your 1099 form.
- Your W-2 form shows the half of your FICA you pay because your employer pays the other half.
How does a 1099 form affect my taxes?
A 1099 form reports the income a taxpayer has earned by doing non-employee work, meaning either independent contract work, a freelance gig, or self-employment work. The entity that issues the payment is responsible for reporting that payment to the IRS on a 1099 form, and for sending you a copy, but this need not be done if you didn't make more than $600.
The IRS has numerous types of 1099 forms, each serving a different purpose, but below are the three main forms you should be aware of.
Since there's no tax withheld from income reported on a 1099 form, you will be responsible for paying the entire 15.3% of the FICA (Federal Insurance Contributions Act) tax on your net income by the tax filing deadline 2024. 12.4% of this amount accounts for Social Security tax, while the remaining 2.9% accounts for Medicare tax.
This is not the case for employees who receive a W-2 form and don't have any 1099 income, as they will only have to pay half of the FICA tax, i.e. 7.65%, because the rest is covered by their employer. But there is some good news for freelancers and self-employed individuals: that second half of the FICA tax is deductible, so you can write it off from your taxable income when online tax filing.
All this may seem like receiving a 1099 form vs W-2 means you’ll end up paying more tax, but the opposite is actually true. Many people who work for themselves can pay less tax than an employee at a company, because they qualify to claim some of their business expenses as deductibles and lower their tax bill when online tax filing significantly.
Does keeping track of all your business expenses and saving your receipts sound like a lot of work? It doesn't have to be. With FlyFin, you can link your expenses and watch the AI-powered tax engine find every possible deductible to save you money and time come tax season. If you have tax questions at any time, you can also reach out to our expert CPAs for unlimited answers free of cost.
Is having a W-2 and 1099 in the same year useful?
Short answer: Yes! If you have self-employed income, you are expected to pay quarterly estimated taxes by the IRS. While this can seem daunting, having W-2 income, as well, can help you bring down your tax payment when online tax filing.
Let’s say you work full-time for an interior design company. You receive a W-2 form from them showing your annual income and how much tax was withheld from your paycheck depending on your tax bracket.
You earn $42,000 a year, but you also work as a freelance design consultant and calculate that your quarterly tax payments will add up to $800 in total. So you get both W-2 and 1099 forms.
You could talk to your employer and use Form W-4 or an Employee’s Withholding Certificate to increase your tax withholdings from your W-2 income enough to cover your quarterly tax payments and not have to make separate payments for the estimated tax you owe.
One downside to this method is that your employer may overestimate how much to withhold, which may leave you with less in your paycheck than you need to cover your expenses. Your employer can also underestimate the withholding amount, leading to a fine from the IRS. If you're ever in doubt about using Form W-4, you can always pay your estimated taxes yourself every quarter using Form 1040-ES.
When can you start filing taxes 2024?
Tax season usually starts in late January. If you’re asking when is tax filing due, the answer is by April 15th. If you file for an extension, then the answer to when is the last day to file taxes 2024 is October 15th.
I have a W-2 and a 1099, can I get the Qualified Business Income deduction?
A QBID allows for small business owners and self-employed individuals to deduct 20% from their taxable income, provided their business is an S corporation or sole proprietorship by the tax filing deadline 2024. These qualify as "pass-through entities," meaning the owner pays tax at an individual level rather than a corporate level.
Being a W-2 employee won't qualify you for a QBI deduction, but your 1099 income might. There are a lot of conditions that determine whether you will qualify for a QBI, and you can find them all here.
There are clearly some advantages to being both a W-2 employee and paying 1099 employee taxes, and it's easy to see how important it is to be aware of all of them when you're trying to make the tax filing deadline 2024.
What is the difference between W-2 and 1099 employees?
The difference between W-2 and 1099 employees comes down to employment status and tax responsibilities. If you're classified as a W-2 employee, you work directly for an employer who withholds taxes from your paycheck, including Social Security and Medicare. On the other hand, as a 1099 worker, you're an independent contractor responsible for handling your own taxes, including self-employment taxes by the tax filing deadline 2024.
Deciding whether to be W-2 or 1099 depends on your preference for stability versus flexibility. W-2 employees often have access to benefits like health insurance and paid time off, while 1099 contractors typically have more control over their schedules but must manage their own tax filings. You can also ask a tax pro for more advice on the 1099 vs W-2 benefits when online tax filing.
What is the difference between 1099 and W-2 taxes?
The difference between 1099 and W-2 taxes lies in how they're managed. As a W-2 employee, your employer automatically withholds federal and state taxes, making your online tax filing process simpler. They also contribute to half of your Social Security and Medicare taxes.
On the flip side, if you're working under a 1099, you’re considered self-employed. This means you’re responsible for paying the full amount of Social Security and Medicare taxes through the self-employment tax. Whether you're classified as W-2 or 1099 impacts your taxes, and understanding 1099 vs W-2 taxation is essential when filing your returns.
1099 vs W-2 forms
When it comes to comparing the 1099 vs W-2 forms, the key difference is the type of worker each represents. The 1099 vs W-2 form is used for employees who work directly for an employer. It shows how much you’ve earned, as well as how much has been withheld for taxes, Social Security, and Medicare.
In contrast, the 1099 form is issued to independent contractors or freelancers. This form reports how much you've been paid, but it doesn’t withhold any taxes. If you're deciding between working as a W-2 employee or a 1099 contractor, consider how W-2 form vs 1099 forms affect your tax obligations. When is the last day to file taxes 2024? April 15th.
W-2 vs W-9 form
The W-2 form vs W-9 forms are different to the 1099 form vs W-2 distinction. It serves different purposes depending on your employment status. Imagine you’re a freelance photographer. When you take a gig with a wedding planning company, they’ll ask you to fill out a W-9 form. This form collects your name, address and SSN for tax purposes.
Since you’re working as an independent contractor, the company won’t withhold any taxes from your payment. Instead, at the end of the year, you’ll get a 1099 form showing how much they paid you for those stunning wedding photos.
Now, let’s say you accept a full-time position as a photographer for a local magazine. In this case, you’d be a W-2 employee. The magazine would withhold taxes from each paycheck for federal income tax, Social Security, and Medicare. At the end of the year, you’d receive a W-2 form that summarizes your total earnings and how much was taken out for taxes. This makes tax season easier since the magazine has already handled most of the tax work.
So, when you’re deciding between 1099 vs. W-2, think about your situation. If you’re freelancing and filling out a W-9, you’ll need to keep track of your own taxes. But if you’re in a steady job with a W-2, your employer takes care of that for you. Knowing how these forms work can make filing your taxes a lot simpler. And when is the last day to file taxes 2024? April 15th.
1099 vs W-2 work: which should I pick?
Choosing between 1099 vs W-2 work depends on your priorities. If you value stability, being a W-2 employee might be the better option, as it comes with consistent pay, tax withholdings, and often benefits like health insurance and retirement plans. On the other hand, working under a 1099 form vs W-2 work provides more flexibility.
As an independent contractor, you control when and how you work, but you’ll need to handle your own taxes, including paying the self-employment tax. When deciding between the W-2 form vs 1099 work, think about whether you prefer structure or independence in your work life.
Let’s say you're a graphic designer, and you have the option to work as either a W-2 employee at a design firm or as a 1099 independent contractor for multiple clients. In this W-2 form vs 1099 scenario, there are key differences. As a W-2 employee, your employer handles withholding taxes like federal income tax, Social Security, and Medicare.
You’ll also likely get benefits such as health insurance, paid time off, and a retirement plan. When tax season comes, you’ll receive a W-2 form detailing your income and withholdings, making tax filing easier since everything is already taken care of.
Now, if you choose to go the 1099 route, you're essentially your own boss. You decide which projects to take and how much to charge, giving you more flexibility in your schedule. However, being a 1099 contractor means you’re responsible for paying the full self-employment tax, covering both the employee and employer portions of Social Security and Medicare. You’ll also need to set aside money for taxes and file quarterly payments. At year’s end, each client will send you a 1099 form showing what they paid you, but no taxes are withheld.
FlyFin’s CPAs are experts at handling self-employment taxes and can prepare and file your income and self-employment returns along with calculating how much you owe. AI finds deductions to keep your tax bill low.
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