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Income Categories Guide

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Income Categories Guide

Choose the right category for your income transactions

Quick Reference
You received...Use this categoryTax Form
Paycheck from employerW-2 Wages/PaycheckW-2
Bonus or commission from jobBonus/CommissionW-2
Uber/Lyft/DoorDash payoutGig Platform Income1099-NEC
Client payment for freelance workFreelance/Contract Income1099-NEC
Cash payment for side workSide Gig CashSchedule C
S-Corp distribution (after salary)Owner DistributionK-1
Money taken from sole proprietorshipOwner DrawNot income
Tips from gig workTipsSchedule C
Tax refundTax Refund1099-G
Gift from family/friendsGift ReceivedNot taxable

Understanding Your Income Type

W-2 Income (Employment)

If you work for a company and receive a paycheck, you're a W-2 employee. Your employer withholds taxes for you.

W-2 Wages/PaycheckBonus/CommissionSeverance Pay
1099 / Self-Employment Income

If you work for yourself or do gig work, you receive 1099 income. You're responsible for paying self-employment tax (15.3%).

Gig Platform IncomeFreelance/Contract IncomeService RevenueTips

Business Structure Matters

Sole Proprietor / Single-Member LLC

All business profit flows to your personal taxes via Schedule C.

Client pays you $1,000Freelance/Contract Income
You take $500 for personal useOwner Draw

Key point: "Owner Draw" is not income — it's just moving money from business to personal. Your income is the profit on Schedule C.

S-Corp or LLC Taxed as S-Corp

You must pay yourself a "reasonable salary" as a W-2 employee. Remaining profits can be taken as distributions (saves ~15.3% in SE tax).

Business profit: $100,000
Your W-2 salary: $60,000Subject to payroll taxes
Distribution: $40,000Saves ~$6,120 in SE tax
Warning: The IRS requires "reasonable compensation." Underpaying yourself and taking excessive distributions can trigger an audit.

Common Scenarios

Day Job + Side Gig

You work a 9-5 job AND drive for Uber on weekends.

Monthly paycheck from employerW-2 Wages/Paycheck
Uber weekly payoutGig Platform Income
Uber tipsTips
Full-Time Freelancer

You do consulting work for multiple clients.

Invoice payment from Client AFreelance/Contract Income
Invoice payment from Client BFreelance/Contract Income
Referral bonusOther Income
S-Corp Owner

You run a business as an S-Corp.

Monthly salary from your S-CorpW-2 Wages/Paycheck
Quarterly distributionOwner Distribution
Client payments to the businessService Revenue
Multiple Gig Apps

You work for DoorDash, Instacart, and TaskRabbit.

DoorDash weekly payoutGig Platform Income
Instacart batch paymentGig Platform Income
TaskRabbit job paymentFreelance/Contract Income
Cash tip from customerTips

Categories by Tax Form

Form W-2 (Employment)

Income from an employer who withholds taxes for you.

W-2 Wages/PaycheckBonus/CommissionSeverance Pay
Form 1099-NEC (Self-Employment)

Income where you must pay your own taxes (15.3% SE tax).

Freelance/Contract IncomeGig Platform IncomeService Revenue
Schedule K-1 (S-Corp/Partnership)

Profit distributions from an S-Corp (not subject to SE tax).

Owner Distribution
Not Taxable / Transfer

Money movement that is not considered income.

Owner DrawGift ReceivedReimbursement
Still Confused?

Ask yourself these questions:

  1. Did someone else withhold taxes? → W-2 income
  2. Did you receive a 1099? → Self-employment income (Schedule C)
  3. Are you taking money from your own business? → Owner Draw (sole prop) or Owner Distribution (S-Corp)
  4. Is it a gift, not payment for work? → Gift Received

When in doubt, consult a tax professional for your specific situation.