Learn what to do if you need to file a 1099-MISC and W-2 during tax season.
Self-employed individuals don't always just work for themselves. Many also work for an employer as a formal employee. You get a W-2 to report this type of income. Here’s what to expect if you get a 1099-MISC and W-2, and how to handle them in QuickBooks Self-Employed.
When you work for someone as an independent contractor, they usually don't withhold taxes. That means you need to do your own withholding and pay for taxes. Your 1099-MISC includes your total earnings since no taxes were taken out.
How your income is taxed
Everyone pays a percentage of their income to cover Social Security and Medicare taxes. As an employee, you split the cost with your employer. You usually pay around half and your employer covers the other half.
If you're self-employed, you cover all of your taxes. This may mean you pay more taxes than an employee for the same amount of income. However, you can usually deduct some of your business-related expenses. This can greatly reduce the amount of taxes you actually owe in the end.
How to track income in QuickBooks Self-Employed
If you're self-employed, you need to make federal estimated quarterly tax payments four times a year. QuickBooks Self-Employed estimates your tax payments based on your self-employed income (i.e. what shows up on your 1099-MISC).
QuickBooks Self-Employed also considers your tax situation. When you fill out your tax profile, you tell QuickBooks about your 1099-MISC and W-2 income. This puts you in a tax bracket, which is part of how QuickBooks calculates your federal estimated quarterly tax payments.
What info you need to send to your client
The person who hired you as an independent contractor needs specific info to fill out and submit your 1099-MISC. If they use QuickBooks Online, they can invite you to fill out a W-9 form. This makes it easy to send your info and get your 1099-MISC when it's ready.