The IRS has numerous forms that most taxpayers find cumbersome when filing their tax returns. One of the most important IRS tax forms is Form 1099, which covers numerous kinds of income other than wages, salaries, and guidelines. There are numerous types of Form 1099 but, Forms 1099-INT, 1099-R, and SSA-1099, are the most common.
While every employee receives a Form W-2 reporting annual pay, it is important to Include a copy with your tax return. Forms 1099 are important and are a vital part of IRS computer matching. IRS computers to check each one against your tax return.
Here are some key facts about the 1099s that you may be receiving
Timing and Address.
Businesses usually send out the forms by Jan. 31 for the prior year and there are many varieties, including Form 1099-MISC to report any payment of $600 or more. It is essential for you to see any form that the IRS sees, so if you are moving, place a forwarding order with the Post Office.
Give an account of Errors Immediately.
Although issuers need to mail Form 1099 to taxpayers by Jan. 31, they have until February 28 send copies to the IRS. If there’s an error, there is a need to report the same to the issuer immediately, as there may be time to correct it prior to it going to the IRS. If the issuer has already dispatched it to the IRS, it's important to get the corrected form issued.
Report Every One.
Every Form 1099 includes your Social Security (or taxpayer identification) number. That’s how the IRS matches Forms 1099 to your tax return. If you forget to report a payment, the IRS will send you a computer-generated notice with a bill for the tax. Every year the IRS sends millions of notices asking for more money based on matching 1099s.
It is best to report errors to payers and also keep your payers advised of your current address. If you don’t receive a Form 1099 you expect, don’t ask for it. If you are expecting a Form 1099, you know about the income. Just report that amount honestly on your tax return.
In most cases, if you call or write the payer asking for a 1099, there is a possibility of getting an incorrect one or even ending up with two. As the penalties for not reporting these payments to the IRS on 1099 forms can be substantial and stiff, it is best to make sure that all payments that classify as 1099 incomes are recorded on a 1099 form and sent to both the IRS and the payee by the deadline.
It is always best to be safe rather than sorry. Effective tax planning and taking the help of a tax expert can avoid the stiff fines. If you are worried about the difficulty of preparing these forms, to make the process simpler you can use 1099 software to help you prepare your 1099 information returns. With a tax expert also get assistance in overseas voluntary disclosure, FBAR, etc.