From large corporations to startup companies revenue reporting forms are applied to their employees and contractors. One of them is 1099 that can be used for various purposes, but more often, it is issued to a freelancer, to account for the income that he or she received from a particular company. There are different types of this blank for the revenue report. The company is only obliged to indicate the income received by this employee, without making any deductions from it.
What do You do?
It’s not a surprise to guess which career paths are more likely to be considered for self employed occupation. Gig economy is sticking to colors more easily than ever. Wether you’ve ever considered yourself as a performer of alternative job or not – up to the half of US workforce can be considered as non-traditional. Top 10 includes: childcare workers, farmers, gardeners, beauty care specialists and dentists. Last years most popular professions included writers, photographers, models, graphic designers, food service managers and video editors.
If you ever wondered to have a part time job to control the schedule or planning to get a side job, this will be one of the ways to start with. Companies that provide help of freelancers as an intermediary instance between the customer and the executor are really popular these days. According to the laws of the United States, such freelancer fills out form 1099-Misc when submitting annual income information. It’s important to mention that people who work there don’t get a permission to have sick leave, unemployment insurance nor employee’s pension.
Take into consideration that this specific document can be used for various purposes. Just imagine that number of blank variants counts to twenty three. Starting with variant A that is used for Abandonment of Secured Property or Acquisition transaction to RRB-1042S: Pay by the Railway Retirement Board to Non-resident Aliens.
For each blank, no matter where it used there should be 4 copies – one for Tax Department of the State, other for IRS and 2 left for payee and payer accordingly.
What’s to do with W2
W2 is one of the most standard forms of payment. It is being transmitted at once, including taxes. You always indicate how much you earn, tax service can check it when the time comes and you can take loans, have a pension and other perks that come to people who disburse levy and can prove it.
If you work for 1099 – situation is different. You will have to disburse the tax on your earned money on a quarterly basis, not at once. Calculate the approximate amount of money you earn and the amount of tax you have to pay and divide that amount by 4 parts. With 1099 you pay a little more taxes and it’s more complicated to deal with papers.
Whether it’s worth to count on this blank
Despite the popularity growth of being a subcontractor there always will be a blot on the landscape.
By working on 1099, you can not become unemployed on the stock exchange if you lose your job. Plus as mentioned above, you receive less money in comparison to W2 workers. You are responsible for all your own taxes – now you pay fully for pay for social security and medicare.
It’s time to sum it up
Your own decision on whether to become subcontractor is based on obtained information and current situation. So if ‘what is 1099 form I come across with’ Q pops in your mind – that means that not enough data was received to become this type of freelancer. On the contrary – if all is clear but decision is not made yet – it will be a major help to just ask around some people who are already working this way or even consult a lawyer.