Understanding your tax forms

There are plenty of tax forms to make your head spin, but most likely you won’t need to deal with all or most of these. Below are 4 of the most common tax forms explained: the 1040, 1099, W-2, and W-4.

1040

A 1040 is the U.S. Individual Income Tax Return form where you declare your total gross income in money, goods, property, and any other income. On this form you have to declare all forms of income and deductions. There is also a 1040A which is essentially the same but a shorter version, and a 1040EZ which is for people filing with no dependents. These are simpler than the basic 1040, but not everyone qualifies, and you may leave off some income sources or deductions. The IRS says use the 1040 when in doubt, but make sure you aren’t wasting your time on that for no reason.

1099

A 1099 form is similar to your W-2, but you will fill this out for income other than your wages from an employer. This may include money you made from rent, selling things on etsy, or making money from selling off your stocks. There are many other things that qualify, but typically if you’re making money outside your paycheck from a full-time employer, then you need to use this form.

W-2

A w-2 is the form your employer gives you that lists all of your wages for the year. It also tells you how much they withheld from your paycheck in taxes. You’ll only get this if you’re an employee of a company, not if you’re self-employed or a contractor.

W-4

A W-4 is what you give to your employer, so they know how much tax to withhold from your paycheck. This way the IRS can take the taxes that they expect you to pay as the year goes on, rather than taking all of it at once when you file your taxes. The IRS says you should give your boss a new W-4 every year, but it’s more important to do it if you have a big change in your financial situation.

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