Tax season is underway, and that means that you need to be on the look out for forms arriving in the mail (or sent via email). Some of the forms that you might be receiving this tax season include 1099 forms. There are several different types of 1099 forms, and you need to be on the lookout for them, if they apply to the type of income that you receive. Here are seven 1099 forms to watch for.
If you received income from interest, you should receive this form. It’s normally issued if you earned more than $10 in interest. So, if you have a savings account, CD, interest-bearing checking account, or money market account, you will need to be on the watch for a 1099-INT. Realize, too, that if the interest didn’t come to you, but instead was reinvested in a CD, you still pay taxes on the income.
Do you have a dividend portfolio? If so, and you received distributions (including automatically reinvested dividends through DRIPs) of more than $10, you will receive a 1099-DIV. Be on the watch for this form in the mail if you own dividend stocks. The main exception (although there are others) is if you hold your dividend stocks in a Roth retirement account.
Independent contractors receive this form when they do at least $600 of work for a client. Each client issues the 1099-MISC independently. However, the new 1099-K may preclude some of your clients from issuing a 1099-MISC if they paid through a third-party processor like PayPal instead of paying you directly through direct deposit or check.
This is a relatively new form. This form is issued by third-party payment processors, such as PayPal and Google Checkout, as well as by credit card payment processors. If you have at least 200 transactions and at least $20,000 in sales, you will be issued the 1099-K. There is some confusion about who needs to issue this form, so some of your clients might send your a 1099-MISC, even as you receive a 1099-K. This means you need to be on the watch for income that is double-reported, and be ready to document it.
The 1099-B comes from brokers or mutual fund companies, detailing the shares you sold. Not only do you receive information on how much you received for the sale of your investments, as well as the date, but you will also receive cost basis information, making it easier to understand your gains, and how much you have to remport as income.
When you receive a refund on your state and local taxes, you will receive a 1099-G. If you itemized your taxes last year, and deducted your state or local taxes on your return, you need to report your refund as income. However, if you take the standard deduction, you don’t need to worry about reporting the information on the 1099-G as income.
This is the form sent out when you get a distribution from a retirement plan. If you roll over your money, or if you convert a traditional IRA to a Roth IRA, you will receive this form. Remember that a 401(k) rollover or an IRA conversion is considered a distribution, so you will receive the 1099-R detailing the transactions.
What to Do with the Forms
If you have an accountant, bring all of these forms for your tax appointment. Some of them need to be filed along with your return, while others are just informational. With informational forms, you simply report the income in the proper place on your return, and then file the return without the forms. However, you should still keep the forms with your copy of the return, just in case you need documentation in the event of an audit.
For the most part, you are expected to share your income with the IRS, even if you don’t receive a form. If you earn $300 on a freelance job, you won’t receive a 1099-MISC, but the IRS still expects you to report that income. Consider which forms are likely to come in the mail soon, depending on your financial situation. Pay attention so that you will know what to do with them with they come.