Tax Form W-2 Versus 1099 Misc Box 7

This is my 15th year as a paid tax preparer, I have a Preparer Tax Identification Number (PTIN); it is required by the Internal Revenue Service (IRS) for people being who are paid to prepare individual tax returns. It involves studying tax law and earning 18 hours of tax law credits as a minimum requirement on an annual basis. Credentials for Tax Lawyers, Enrolled Agents and Certified Public Accountants have even more requirements.

Most paid tax re-parers work on commission basis, some are paid hourly or use a Fee Schedule. In general, we are professionals and take pride in our expertise. We do not expect our clients to be experts. We do expect them to have a basic understanding of what types of income your are earning. United States tax law does not care if your income is legal or illegal, they are interested in the tax revenue.

I am surprised at the number of people who do not know the difference between these two forms. W-2 is for earned wages, i.e., employee income. . A 1099- Misc (Non-employee Compensation), meaings the taxpayer is not an employee. The taxpayer pays 100% of federal , social security and medicare taxes. A W-2 taxpayer pays 50% and the employer contributes 50% for federal taxes, social security and medicare. This detail has an impact on the taxpayers’ tax liability. I highly recommend reading the IRS governance on self-employment, gig economy, freelance, or other earned income sources. The best resource is from the IRS.gov web site. They have webinars, videos and online pamphlets explaining the tax process for income and expenditures. It is Free!. If you are confused, call the IRS or contact a tax professional. It will save you money and the aspirin for headaches. Read Instructions for Miscellaneous Income and Nonemployee Compensation

I also recommend reading about the Form 1040, U. S. Individual Income Tax Return. A great free resource.

Published by Mews News

Blogging from the Pacific Northwest

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