If you can’t tell the difference between form 1040 and form1099, you are not the only one. Everyone who pays taxes, especially for the first time, gets a little confused between these two. You need to know how and when to use the different kinds of IRS tax forms. If you do not use the right form the first time you file your taxes, you may make a costly mistake. To help you out, the following is the difference between 1040 and 1099 tax forms.
A 1099 form is a form that a company sends to a taxpayer for some payment they have made to the taxpayer. Examples of such payments include dividends, interest, sales of stock, or money paid for work done when the taxpayer is working as an independent contractor, and many more. Each of these has its own 1099 form on which it is reported.
A 1040 form, on the other hand, is a tax return form that a taxpayer fills out. The taxpayer, along with listing other income sources, includes income that is filled out on the 1099 forms that that person received. The tax is then computed, and the 1040 form is sent to the IRS.
|1040 forms||1099 forms|
|Used to file tax with the IRS.||Used by a company to reflect a miscellaneous expense to an individual (which is an earning to the individual for services or work done)|
|1099 form details are among the listed items||Does not include details of a 1040 form.|
The difference between these two forms is in their usage.
A 1099 form is sent to people by a company to show a miscellaneous income that they earned from the company for services rendered or work done. These miscellaneous incomes range from dividends from a company in which these people own stock, bank interest, or money received as a payment for work that these people performed for the company issuing the form. An individual can receive several 1099 forms, depending on the number of miscellaneous incomes the individual attracts within that tax year.
A 1040 form, however, is used to file individual tax returns, inclusive of all 1099 forms received. It is used to list all income an individual has, all deductions the individual is claiming, any credits for a variety of expenses, and so on. The form states the amount of tax that the individual owes the IRS or is owed as a refund by the IRS. Any 1099 forms received are listed on the 1040 form as income.
For more information about what a 1099 form is and when to use one, watch this video: