Tag Archives: tax forms

Simplifying The W-4 Form

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The W-4 Form is utilized by employers to calculate the amount of tax they need to withhold from their employees’ wages, salary, or other monetary compensation. Strangely, though it should match the tax due on 1040 series IRS forms, the two amounts frequently differ substantially!

Why should this be? Well, when an employee fills out a Form W-4 (the official name) and stipulates the amount of allowances to be claimed, he or she is basing the claim in large part on the expected tax filing situation for the year – namely, how much he or she is expecting to earn.

Every allowance reduces the amount of federal income tax withheld, which in turn lowers the tax refund that may be due. In fact, one’s tax liability may possibly even be raised!

No interest is paid by the government in instances of over-withholding, but if, due to those allowances claimed, under-withholding results, the employee will need to pay penalties at a certain point. The situation is rendered all the more difficult for some because of the fact that it’s possible to claim different numbers of allowances between a W-4 Form and a 1040 series form.

Another potential source of misunderstanding entails the fact that the W-4 Form doesn’t deal with seasonal employment. Just a casual layman’s perusal of tax policies at the level of the end-user shows how really esoteric tax laws can be! When even simple matters like reporting income and claiming allowances can be subject to such nuance and variability, one really does wonder just to whom these laws are supposed to benefit.

Yet believe it or not, though wider tax policies at the macro level may be open to debate, many of the little nitty-gritty details such as those layed out here were actually intended to help rather than hinder or even hurt.

How The W-2 Form Is Used For Taxes

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The W-2 Form is utilized to report wages paid and taxes withheld. Officially recognized as the Form W-2, Wage and Tax Statement, employers must complete one for every employee that receives wage, salary, or other payment as a result of work performed.

These forms must be delivered to each employee on or before the thirty-first of January of each calendar year so that early tax filers may have access to this essential document, essential for claiming refunds or paying any money owed.

Multiple, and most likely thoroughly redundant, W-2 forms will be sent to those workers whose circumstances of employment involve tasks performed in more than one state. Some employers will simply print multiple rows of states on all copies of the W-2 sent out. Others generate W-2s that attribute gross compensation twice, once for each state, possibly causing clerical problems in the process.

The copies that employees really see, which they receive in the mail every year ahead of tax season, is but a few of several that make up the complete Form W-2. One is labeled Copy 2, to be filed along with the state and local income tax returns, if any. Copies B and C are also sent, for purposes of federal income tax returns and personal records, respectively.

Copy 1 is submitted by the employer towards the state or local taxing authority, as mandated by law (which some jurisdictions don’t require). Copy A goes towards the Social Security Administration. Copy D is for the employer’s own records.

The anatomy of a W-2 Form can be very interesting. On it are recorded every thing earned for the year, which often feels like quite a surprise to many, unfortunately! So many taxes…and yet it is almost fun to see precisely how much goes to what, whether for Medicare or Social Security or the 401K.

The Controversy Behind The 1099 Form

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The 1099 Form is filed on behalf of independent contractors in the United States every year as required by law. Independent contractors are persons or companies that provide goods or services to another person or corporation within the terms of a contract or verbal agreement.

All those individuals or companies that make use of independent contractors must file a 1099 Form for every contractor paid an amount of six hundred dollars or more for the duration of a single year. As might be imagined, it’s possible for thousands of such contractors to be hired, and so those who make use of more than two hundred and fifty need to file all their forms electronically, that is virtually always generated by software.

In addition to a 1099 Form, the 1096 is also necessary when it comes to paper copies sent through the mail. Payees typically use the info on their 1099s to finish their own tax returns, and will most likely use the Combined Form 1099 that records all the independent contracting they have done for the year.

Generally speaking, however, taxpayers are not required to attach a 1099 to their own federal income tax returns except under certain circumstances. Guidelines concerning 1099 forms are to be found in IRS Publication 1220.

Use of the 1099 has become quite controversial in the present financial recession as more and more employers seek to save money by classifying an ever bigger part of their workforce as independent contractors. The benefits to the employer in savings are essentially passed onto the worker, whose take-home or net earnings will take a substantial hit relative to that of a regular employee. However the practice has becoming increasingly widespread in the American economy today because really few candidates can afford to complain or hold out for a better job offer in such recessionary times.

Filling Your State Tax Forms

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State tax forms are required to file state taxes – but exactly where is our tax money going? Taxes are used to support the government, but in a democracy the government is supposed to be “for the people,” as a popular rumor has it. All of the state tax forms filed year in, year out seem to have no effect on our local governments, which across the nation are more likely than not operating at a deficit. How is this possible with all the money pouring into government coffers?

Most individuals simply file their state tax forms and leave it at that, too busy with their lives and some even hoping not to attract any government attention. But a growing number of our fellow citizens and residents are deeply concerned over where “their money” is going. Nearly everyone agrees with paying for firefighters, sanitation workers, and other civil servants, but even then there can be a lot of controversy over the details.

Take educators for example. Again, nearly everyone agrees that educators are necessary. But how to compensate them with our tax dollars, exactly? Currently, numerous individuals across the nation are up in arms over teacher perks and salaries.

It is felt that teachers have things much too comfortable, and there are folks who would like to make the profession of teaching a job like any other, which in the United States means “hire and fire at will.”

These people want to, they say, hold teachers more “accountable” for student performance, which is often proposed to be measured by standardised test scores. But the other side of the argument believes that teaching is not just a job like any other, that the training of minds and the inspiration of hearts is not something which can be neatly measured on a quarterly or yearly schedule like some corporate earnings report.