Isn’t it ironic that the most wonderful time of the year is followed by the most dreadful time of the year, aka tax season? Yes, we know. Tax season is upon us already. Employers are busy preparing their employees’ W-2 and 1099 forms, in addition to their corporate and/or individual taxes. Doesn’t it make you wish there was a guide for all of that, so you knew which form was which, and which forms applied to you and your employees? Well, have we got good news for you! We created that exact guide you can use to brush up on what’s what in the tax department.

If you find yourself needing or wanting more help, give us a call. We can file your payroll taxes for you!

Individuals filing taxes

We’ll start with the tax forms individual employees will receive from their employers at the end of January or the beginning of February. Generally, these forms indicate how much an employee was paid by their employer during the previous calendar year, including how much they paid towards Social Security and Medicare taxes, etc. We will begin with the most popular, the OG tax form, the W-2 and work our way through other common individual tax forms. If you want to jump directly to the corporate tax section, click here.

Forms employees will receive from employers:

W-2

Employees receive this form from their employers at the beginning of the year, showing their salaries, wages, and tips paid during the past tax year. It also includes the wages withheld to pay state and federal income taxes, Medicare and Social Security taxes, retirement contributions, etc. View our article on how to read a W-2. Read our article on common W-2 errors.

Employers must send W-2s by January 31st so workers should expect to receive their copy by the end of January or the beginning of February. Employers also send copies of W-2s to the IRS.

1099

This group of forms report income other than wages, salaries or tips from an employer(s) reported on a W-2. Employers should send Copy B to the contractor and Copy A to the IRS. There are penalties for misclassifying employees. If you need assistance determining whether a worker is an employee or an independent contractor, contact us.

Common forms include:

  • 1099-NEC: This is a new form for the 2020 tax year. Employers must file this form if they paid $600 or more to an independent contractor (non- employee compensation) during the tax year. This form replaces the 1099-MISC. Find updated rules for the new form from the IRS here.
  • 1099-MISC: The 1099-NEC replaces this form for independent contractor income, but it is still used to report miscellaneous income such as rent, legal settlements or award winnings of at least $600. You can learn more about miscellaneous income here.
  • 1099-INT*: reports interest earned on investments.
  • 1099-DIV*: reports dividends and distributions from investments.
  • 1099-R*: reports payments made on IRAs, retirement plans, pensions, etc.

*These forms are not distributed by an employer, but rather (most commonly) by a bank, financial institution or government agency.

Forms employees will use to file federal income taxes:

1040

The Form 1040 is the personal federal income tax return form most workers recognize and use. This form replaces old versions of the Form 1040EZ and 1040A. It helps employees calculate and file their federal tax returns. Instructions from the IRS can be found here. This form is due April 15, 2021.

Tax schedules are additional tax forms you may need to fill out if you have certain types of income or deductions like interest or charitable donations. Below is a list of common tax schedules that are attached to Form 1040:

  • Schedule A – details the amount of itemized deductions such as property taxes, charitable contributions, mortgage interest, state taxes, medical expenses or other tax breaks. Usually you compare this amount to the standard deduction; if your itemized deductions are higher than the standard deduction, you could end up saving money.
  • Schedule B – reports taxable interest or ordinary dividends if the amount exceeds $1,500.
  • Schedule C – reports self-employment or income – profits or losses from a business you own, freelancing, or contractor work or expenses for a business you own (see sole proprietorship below).
  • Schedule D – reports capital gains or losses from selling stocks, home, or other property or transactions.
  • Schedule SE – calculates the Social Security tax a self-employed individual owes (normally an employer would withhold this amount automatically).
  • Schedule EIC – calculates employees with low incomes and qualifying children additional tax breaks with the Earned Income Tax Credit (EITC).
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1040-SR

The 1040-SR is similar to the 1040 but is intended to be used by seniors aged 65 years and older. It’s considered to be easier to read and use than the standard 1040 tax form. Individuals using this form don’t have to be retired to file. If individuals are filing jointly, only one person has to be 65 or older in order to use the form. This form is due April 15, 2021.

  • 1040x – Form 1040x allows individuals to amend their federal income tax returns.
  • 4868 – Individuals can file an extension on their personal federal income taxes until October with Form 4868. Learn more about this form from the IRS here.

Forms employees fill out with their employer to determine their tax deductions:

W-4

Employees fill out a W-4 form at the start of a new job to determine their withholding on taxes. The form is stored by employers rather than the employee. Workers can refill out a W-4 when life changes occur, like getting married, having a baby, or getting a second job.

W-9

Independent contractors or freelance workers generally fill out a W-9 form for employers or the person who will pay them for the work. The W-9 includes the contractors Taxpayer Identification Number (TIN) and is what informs an independent contractor’s future 1099 form.

Businesses filing taxes

If you own or manage a business, you know that filing taxes for a corporation is not as straightforward as it is for individuals. Really, a business is often paying taxes all year long – with deductions for Social Security and Medicare (payroll taxes), unemployment taxes, quarterly taxes, etc. happening throughout the year. We won’t be discussing those taxes here, but we do have guides to payroll taxes and unemployment taxes. Instead, in this section we will focus on the forms different types of businesses use to file income taxes. Find the guide to e-filing this family of forms here.

The tax forms corporations fill out depend on the type of business they are. We review some of those basics below.

C-Corporations

1120

C-corporations file corporate taxes using Form 1120. A corporation exists separately from its owner(s), different than an S corporation or sole proprietorship. Owners only pay taxes on the corporations’ earnings if they receive salaries, bonuses or dividends. The profit left within the corporation is the business income that is taxed. This form is due April 15, 2021.

S-Corporations

1120-S

S-corporations file corporate taxes using Form 1120-S. An S-corporation is known as a “pass-through’ entity, meaning the business’s income is passed through to its shareholders. The business is not subject to the corporate income tax because its profits are reported on the owner(s) individual income taxes. This form is due April 15, 2021.

  • 1120x – Form 1120x allows owners to amend a tax return for Forms 1120 and 1120-S.
  • 7004 – Form 7004 allows owners to file an extension on 1120 forms.

Sole Proprietorship

A sole proprietorship is also considered a pass-through entity according to the IRS. Again, that means the business owner and business entity are seen as one unit as far as taxes are concerned. The owner is responsible for paying personal taxes on a Form 1040 and then reporting business profits and losses in Schedule C. The two forms together will help the owner determine which tax bracket they are in, and therefore the amount of federal taxes they owe. These forms are due April 15, 2021.

There are many deductions for sole proprietors and business owners to claim that reduce their income, and therefore the amount of tax they owe. Small business owners can estimate the amount of federal income tax to withhold from their employees’ wages with this IRS spreadsheet.

Of course, we have not gone into the nitty gritty details of every tax form or scenario here so work with your tax advisor to help with questions related directly to your business. If you are a business owner and you would like to know more about how you can make paying taxes easier, contact us here.

If you are looking for more information on a different tax form, you can find all of the IRS employment tax forms here. If you need help remembering when all of these forms are due – sign up for our newsletter to download our 2021 Important Dates + Deadlines Calendar!

For tips on how to correct employment taxes, click here. Learn more about e-filing your employment tax forms here.