Late January and early February is usually when year-end informational tax forms start showing up. The person or entity paying you should send out the appropriate 1099 tax form by January 31.
We’re all fairly familiar with W-2s from our employer, but you may also receive various 1099s depending on your activities. Make your tax filing experience smooth this year by staying on top of these informational tax forms. Here are some tips to keep in mind.
Know the different types of 1099s. The most common 1099s that taxpayers receive are:
1099 INT: for interest received
1099 DIV: for dividends received
1099 B: for brokerage transactions (selling stocks and mutual funds)
1099 R: for annuity, retirement, and pension income
1099 MISC: for miscellaneous income
1099 K: for merchant card activity and third party network transactions
Make a list. Review last year’s list of informational tax forms and create a checklist of them. Add to that list any new forms you might expect to receive. Mark them off your list as you receive them.
Check for accuracy. Review each of the informational tax forms for accuracy. Is the income, interest, annuity or other income correctly reported? If cost is reported on the 1099 B, is it the correct amount? Make sure your name and your tax ID (Social Security Number) are also correct.
Take corrective action. If you have not received your information return by the mid February, contact the issuing organization. Also call and start the process to correct any errors you find. Make sure you follow up any correction request in writing.
Conduct withholding verification. If the supplier withheld any tax on this activity ensure it is noted as well.
Understand 1099 Ks. This was introduced to try to capture sales activity from places like eBay and Amazon. If you receive one of these, please pay special attention to the information being reported to you and the IRS. These forms are complicated and track payment processing transactions. If not properly understood, you could inadvertently double book income on your business activity.