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why is it necessary to have a w -2 or 1099 form when using tax preparation software? they highlight job performance which can reduce

Question

Why is it necessary to have a W -2 or 1099 form when using tax preparation software? They highlight job performance which can reduce your tax rate. They show how much you have donated to charities. These forms report income which needs to be used to file taxes. They include passwords for tax preparation software.

Answer

4 (297 Votes)
Verificación de expertos
Preston Master · Tutor for 5 years

Answer

These forms report income which needs to be used to file taxes.

Explanation

The question is asking for the purpose of W-2 or 1099 forms in the context of using tax preparation software. The options provided suggest different uses for these forms. Let's evaluate each option:1. They highlight job performance which can reduce your tax rate.Job performance is not typically a factor in determining tax rates or tax obligations, and it is not reported on W-2 or 1099 forms.2. They show how much you have donated to charities.Charitable donations are not reported on W-2 or 1099 forms. They are typically documented by the taxpayer and may be itemized on Schedule A of the Form 1040 if the taxpayer chooses to itemize deductions.3. These forms report income which needs to be used to file taxes.W-2 forms are issued by employers to employees and report wages, salaries, and other compensation along with taxes withheld. Form 1099 is used to report various types of income other than wages, such as freelance or contract earnings (1099-NEC), interest (1099-INT), dividends (1099-DIV), and other types of payments. Both forms are essential for accurately reporting income on tax returns.4. They include passwords for tax preparation software.Tax forms such as W-2 and 1099 do not include passwords for tax preparation software. Passwords are created by users to secure their accounts and personal information.Based on the above evaluations, the correct answer is that W-2 and 1099 forms are necessary when using tax preparation software because they report income that must be declared when filing taxes. Tax preparation software uses the information from these forms to calculate tax liability or refund.