Tax Terms You Need to Know - W2 and 1099

Video Transcript

Hey this is Chris with Money Burst, and right now we are right in the middle of tax season, which means you're probably scrambling to find all the tax documents that your accountant has asked you for. And you're probably also a little overwhelmed with trying to understand what exactly is happening right now. So, to help you feel a little more at ease, I decided to start this new series going over some of the common tax terms you'll see this tax season.

To kick things off we're going to cover two forms that you've all probably seen at least once in your life, either W2 and the 1099. So, the W2 is like a recap a record of what you made and what you had to deduct from your paycheck throughout the entire year. And you're going to want to make sure you keep these W2s in a safe place because you want to maintain at least one copy for your own records and then another copy for your accountant because this is what they're going to use to make sure that they actually have everything correct on that tax return, before you file.

Now a 1099 form is very similar to a W2, but it's for income that you made outside of your traditional work, outside of your traditional 9 to 5. This could be gig work, little side hustles that you're doing. It could even be something that you get from your bank for the interest that you earn in your bank account. There's a ton of different types of 1099 forms. There's a 1099 NEC, which stands for non-employee compensation. This is the one you're probably most likely to receive for any of that, like, extra gig or side house work that you're doing. There's also a 1099 INT that you would get from your bank for the interest that you earn. Regardless of what type of 1099 form you receive, make sure you keep copies of that as well, just like you would with your W2 form. So that way you have one for your own records and then one for your account, so that way they can go through and get everything correct on that tax return.