This page provides general educational information only. It is not tax, legal, or financial advice. For official IRS form information, visit IRS — About Form W-2 and IRS — About Form 1099.
What are W-2 and 1099 forms?
W-2 and 1099 forms are information returns — documents that report income paid to a person to both the recipient and the IRS. They serve as official records of what income was earned and, in the case of the W-2, what taxes were withheld. Understanding the difference is fundamental to understanding your tax situation.
Form W-2: Wage and Tax Statement
Your employer sends you a W-2 if you are an employee. It reports:
- Total wages, tips, and other compensation paid to you during the year
- Federal income tax withheld
- Social Security and Medicare taxes (FICA) withheld — both employee shares
- State and local wages and withholding (in box 16 and beyond)
- Other compensation such as employer-provided benefits, retirement contributions, and similar items
Employers are required to furnish W-2s to employees by January 31 of the year following the tax year, and to file copies with the Social Security Administration by the same deadline. Source: IRS — About Form W-2.
Key feature: Because your employer withholds taxes from each paycheck, you generally do not need to make estimated payments on your W-2 income — the withholding serves that purpose.
Form 1099: various types
There is no single “1099 form” — it is a family of forms used to report different types of non-employee income. You receive a 1099 when a payer reports income paid to you that is not from employment. Common types:
1099-NEC: Nonemployee Compensation
Replaces the former use of 1099-MISC for freelance, independent contractor, and self-employment income. For tax years beginning after 2025, payers must issue a 1099-NEC if they paid you $2,000 or more during the year for services. This is income on which no federal income tax was withheld and on which you generally owe both income tax and self-employment tax (Social Security and Medicare) as the worker. Source: IRS — Instructions for Forms 1099-MISC and 1099-NEC. The $2,000 threshold may be adjusted for inflation beginning in calendar year 2027; verify current figures on IRS.gov.
1099-MISC: Miscellaneous Information
Still used for rent, royalties, prizes, awards, and other miscellaneous income not reported on 1099-NEC. Source: IRS — About Form 1099-MISC.
1099-INT: Interest Income
Banks and financial institutions report interest income of $10 or more. Source: IRS — About Form 1099-INT.
1099-DIV: Dividends and Distributions
Issued by brokerages and mutual funds for dividends and capital gain distributions. Source: IRS — About Form 1099-DIV.
1099-B: Proceeds from Broker and Barter Exchange Transactions
Reports proceeds from the sale of securities. The 1099-B shows gross proceeds; cost basis may or may not be reported depending on the type of security and when it was acquired.
1099-G: Government Payments
Reports unemployment compensation, state tax refunds (if you itemized the year you received the refund), and certain other government payments. Source: IRS — About Form 1099-G.
1099-R: Distributions from Pensions, Annuities, Retirement Plans
Reports distributions from IRAs, 401(k) plans, pensions, and similar retirement accounts. Source: IRS — About Form 1099-R.
The key tax difference: withholding and self-employment tax
| Feature | W-2 (employee) | 1099-NEC (independent contractor) |
|---|---|---|
| Federal income tax withheld | Yes (employer withholds) | Generally no |
| Social Security and Medicare | Split: employer pays half, employee pays half via withholding | Worker pays both halves as self-employment tax (15.3% on net earnings up to SS wage base, then 2.9% above) |
| Estimated payments required | Usually covered by withholding | Generally yes, if tax owed will be $1,000 or more |
| Schedule | Wages reported on Form 1040 line 1 | Net profit on Schedule C; self-employment tax on Schedule SE |
Source: IRS — Self-Employment Tax. Self-employment tax rate and wage base: verify current year figures on IRS.gov.
California and 1099 income
Wages reported on Form W-2 and income reported on Form 1099-NEC are both included in your federal adjusted gross income, which you report on your California return. Sources: FTB — Wages (W2) and FTB — 1099 guidance for recipients.
If you are self-employed, you have to pay income tax, and you must report all business income or losses on your individual income tax return (Form 540). Source: FTB — Self-employed.
What to do if you receive 1099 income
- Track all 1099 income during the year — do not wait for the forms to arrive to know what you earned
- Keep records of business expenses that may be deductible against self-employment income (Schedule C)
- Estimate your federal and California tax liability early in the year and make quarterly estimated payments if needed (see California estimated tax payments explained). Sources: IRS — Estimated taxes and FTB — Self-employed, which says you may be required to pay estimated taxes quarterly.
- File Schedule C (Profit or Loss From Business) and Schedule SE (Self-Employment Tax) with your federal return
When professional help is appropriate: If you have both W-2 and significant 1099 income, if you run a business, if this is your first year receiving 1099 income, or if you are unsure what business expenses are deductible, a CPA or enrolled agent can help you structure your records and filing accurately. Verify any California-based preparer before hiring. Source: Find or Verify a Tax Preparer (CTEC).
Frequently asked questions
Do I have to report income if I did not get a Form 1099-NEC because the payer paid me under $2,000?
Yes. Gross income “includes all income you receive in the form of money, goods, property, and services that isn’t exempt from tax.” Source: IRS Publication 17. For tax years beginning after 2025, the minimum threshold amount for reporting certain payments increased to $2,000. Source: IRS — Instructions for Forms 1099-MISC and 1099-NEC.
What if the 1099 amount is wrong?
Contact the payer and request a corrected 1099 (Form 1099-NEC corrected). Report what you actually received. If you cannot get a correction, document the discrepancy with records and report accordingly, noting the difference.
Can I deduct the employer-equivalent portion of your self-employment tax?
Yes. You can deduct the employer-equivalent portion of your self-employment tax in figuring your adjusted gross income. Source: IRS — Self-Employment Tax.
What is backup withholding?
If you do not provide a payer with your correct taxpayer identification number (TIN), the payer may be required to withhold 24% of your payments. Source: IRS — Backup Withholding. Verify the current rate on IRS.gov.
Not reviewed by a credentialed tax professional. Dollar thresholds and tax rates cited can change from year to year; verify current figures on IRS.gov and FTB.ca.gov before acting. Official sources: IRS Form W-2 and IRS Form 1099.