For tax purposes, will a W-2 or 1099 form be issued at the end of the year?
Once we have made payouts that total over $650, we will ask you to send us a W9 so that we will be issue a 1099 at the end of the year.
Of course, you are liable for your own taxes. Come January, assuming your total pay was $600 or more, you’ll receive an IRS Form 1099.
But is it that simple? What if you’re the employer not the recipient? This is one of the more momentous decisions in the tax world. In fact, it goes well beyond taxes and covers workers’ compensation, unemployment insurance, state and federal wage and hour laws, pension laws, nondiscrimination laws and more.
It’s hard to think of a more pivotal issue. Yet this decision is made thousands of times a day all over America. Sometimes it is done without much thought. Some employers ask “1099 or W-2?” as if they were asking how you take your coffee.
If you’re the worker, you may be tempted to say “1099,” figuring you’ll get a bigger check that way. You will in the short run, but you’ll actually owe higher taxes. As an independent contractor, you not only owe income tax, but self-employment tax too. On the first $113,700 of income, that’s a whopping 15.3% rate. Beyond $113,700, the rate drops to 2.9%.