Basics of W-2 Forms and 1099 Forms

• Most taxpayers receive income forms provided by employers, clients and other sources that they can use to locate the information necessary to fill out an income tax return. W-2 forms, or Wage and Tax Statements, are sent to workers by their employers after the end of the year and account for wages earned and taxes withheld from pay. 1099 tax forms cover a variety of other income sources like income earned from performing contract work and royalty payments received. In some cases you may receive multiple W-2s and 1099 forms, even if you are a single taxpayer. Whether you or your spouse receive W-2 forms, 1099 forms or both has no bearing on what tax filing status you can choose.
  
  

Types of 1099 Forms

• It is common to receive 1099 income forms even if you receive one or more W-2 forms from working one or more jobs. The IRS states that the following are examples of common 1099 forms: 1099-INT for interest income, 1099-DIV for dividend income, 1099-R for withdrawals from retirement plans, SSA--1099 for Social Security benefits received and 1099-MISC for various sources of miscellaneous income like royalties and non-employee compensation.
  
  

Benefits of Filing Jointly

• Married taxpayers who are not separated must either choose a filing status of married filing jointly or married filing separately. Choosing to file jointly can save you and your partner money on taxes, especially if one of you earns significantly more than the other. For example, Bankrate states that married couples filing jointly pay a tax rate of 25 percent on income earned between $69,001 and $139,350 while separate filers pay 28 percent on income earned between $69,676 and $106,150 for 2011 tax returns. If you earn $100,000 and your spouse earns $30,000, you would be subject to the 28 percent tax rate on some of your income if you filed separately, but you would only pay a maximum rate of 25 percent if you filed jointly.
  
  

Considerations

• It is important to save all of the W-2 and 1099 forms you receive so that you can accurately complete your tax return. Failure to account for income on your tax return could result in an underpayment of tax which could lead to an audit or tax penalty.