Among the various forms you may encounter when it comes to recording and preparing financial information for record-keeping and preparing tax information for the IRS (Internal Revenue Service) each year, is 1099.
This form is used to show when payments, whether actual amounts of money or others that benefit you, such as dividend interest or even credit card debt write-offs, have been made and by whom.
Different versions of 1099
There are several versions of the 1099 form covering different payment types and they’re differentiated by their suffix. A common one many self-employed people, contractors or non-incorporated businesses will receive is the 1099-MISC to show payments over $600 made by an organization for services rendered or the supply of a product.
The 1099-MISC is distinct from the W-2 employees receive from their employer ready for when they’d prepare their tax returns each year.
The 1099 shows the amounts due to the recipient, and it’s important to be aware the IRS also receive a copy of this so they’ll know of the payments or financial benefits gained by an individual or business.
The 1099 is an extremely important document amongst various forms and paperwork you encounter when preparing your tax details, so ensure they’re checked carefully. It needs to tally with what income or financial benefit you expected and then filed so it can be accessed easily come tax preparation time.
You need to ensure the financial benefit is what you actually received because if you report something different to the IRS when preparing your tax details they’ll be aware of discrepancies.
If you receive a variety of different 1099 forms reflecting various sources of income, these will be reported in different parts of your tax return.
You may not necessarily owe tax on the amounts on your 1099 form. For example, in the case of a 1099-MISC received from a customer you’ve completed work for as a self employed contractor or business, the amount they’ve paid you may possibly be offset by expenses incurred in undertaking your business or work activities.
You’d gather together the 1099-MISC forms from your respective customers and offset the total income with legitimate expenses you can claim.
What other 1099 forms are there?
Along with the common 1099-MISC there are many others. Some of them are:
1099-A – you may receive one if some or all of your mortgage was cancelled by your lender. This could have a tax implication as it’s classed as a ‘gain’ so the IRS will need to know.
1099-B – this version covers income from the sale of certain types of securities and even bartering exchanges.
1099-C – if you have a credit card debt settled for less than is owed the amount is taxable income so has to be recorded hence the issuing of the 1099-C.
1099-INT – if you earn more than $10 interest from a bank or other financial institution.
A full explanation of all 1099 forms from the IRS illustrates what forms are issued and when.