As a business owner, there are many important forms that you must complete and file with the appropriate agencies. Few forms are as important as those that go to the Internal Revenue Service. Two of the most commonly used forms for IRS purposes are Form W-2 and Form 1099. While both of these forms are considered “informational returns,” they serve two different functions.
3 Facts About Form W-2
If you have employees, you must file a Form W-2, Wage and Tax Statement. This form is used to report the following:
- Wages, tips, and other compensation that you paid to an employee
- The employee’s income and Social Security taxes that were withheld, as well as additional information
- Wage and withholding information to the employee and to the Social Security Administration. The Social Security Administration shares this information with the Internal Revenue Service
3 Facts About Form 1099-MISC
If you make payments to a person who is not an employee or to an unincorporated business, you must file Form 1099-MISC, Miscellaneous Income. This form is used to report the following:
- Payments made in the course of a trade or business to a person who is not an employee or to an unincorporated business
- Payments of $10 or more in gross royalties
- Payments of $600 or more in rents or compensation
These payments are reported to the Internal Revenue Service. They are also reported to the person or business that received the payment.
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