Important Information About IRS Forms 1099

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Here is important info about IRS Forms 1099 as they’re arriving in your mailboxes this year:

1. Generally, businesses must issue the forms to any payee (other than a corporation) who receives $600 or more during the year. That’s just the basic rule, but of course there are many exceptions. That’s why you probably get a Form 1099 for every bank account you have, even if you earned only $10 of interest income.

important info about IRS forms 1099

This year, stay up-to-date on rules regarding 1099s.

2. Report every, single 1099. The key to these forms is the IRS’s matching. Every one includes the payer’s employer identification number and the payee’s Social Security number. The IRS matches Forms 1099 with the payee’s tax return. If you disagree with the information on the form but can’t convince the payer you’re right, explain it on your tax return. If you receive a Form 1099, don’t just ignore it, because believe us the IRS won’t.

3. There are many different types. There’s a 1099-INT for interest; 1099-DIV for dividends; 1099-G for state and local tax refunds and unemployment benefits; 1099-R for pensions and payouts from your individual retirement accounts; 1099-B for broker transactions and barter exchanges; 1099-S for real estate transactions, etc. Then there’s Form 1099-MISC (for miscellaneous) which seems to provoke the most questions.

4. Timing, timing, timing. Businesses must send out Forms 1099 by Jan. 31 for the prior calendar year. But don’t assume you’re off the hook for reporting income if you don’t receive a Form 1099 by February or even March. There are penalties on companies that issue Forms 1099 late, but some come as late as April or May after you may have already filed your return. Even if you never receive a Form 1099, if you receive income, you got to report it.

5. Changing addresses. The information will be reported to the IRS based on your Social Security number regardless of whether you receive the form. Update your address directly with payers, as well as putting a forwarding order in with the U.S. Post Office. You’ll want to see any forms the IRS sees.

6. The IRS also gets them. Any Form 1099 sent to you also goes to the IRS. The deadline is Jan. 31 for mailing Forms 1099 to taxpayers, but the payer generally has until the end of February to send all its Forms 1099 to the IRS. This year (2017, for 2016 payments), the IRS has moved up the filing date for Forms 1099-MISC reporting non-employee compensation in box 7. The reporting date to the IRS will now be the same as the due date for the forms to be issued to recipients, January 31.

7. Report any errors ASAP. If there is an error on a Form 1099, tell the payer immediately. There may be time for the payer to correct it before sending it to the IRS. If the payer has already dispatched the incorrect form to the IRS, ask the payer to send in a corrected form.

8. IRS Notices. If you forget to report a Form 1099, the IRS will send you a computer-generated letter billing you for the taxes. If it’s correct, just pay it.

9. Consider state taxes, too. Most states have an income tax, and they will receive the same information as the IRS. If you missed a 1099 on your federal return, your state will probably bill you too.

10. Don’t ask. Keeping payers advised of your current address is a good idea, as is reporting errors to payers. However, if you don’t receive a Form 1099 you expect, consider not asking for it. In some cases, if you are missing an IRS Form 1099, you may want to keep quiet. If you are expecting a Form 1099, you know about the income, so just report that amount on your tax return. IRS computers have no problem with that. If you call or write the payer and raise the issue, you may end up with two of them, one issued in the ordinary course (even if it never got to you), and one issued because you called.

If you’re looking for tax advice that focuses on your particular needs, call Williams & Kunkel CPA today in Flower Mound at 972-446-1040 to have a chat.

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Source: Forbes

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