Your 1099’s are coming soon
Virtually every small business, including sole-proprietors, must issue at least one 1099 each year. And this year there is a new one called the 1099 NEC. Here is a summary of the most common of these informational tax forms that you will need to file your tax return this year.
The Form 1099
The Form 1099 is an informational tax form that captures economic activity that is then reported to you and the tax authorities. The primary purpose of the form is to ensure you are reporting your taxable income. The forms are typically required to be sent to you on or before January 31st each year. The same information is due to the IRS on or before February 28th (March 30th if the form is filed electronically).
The 1099 NEC
Beginning this year, nonemployee compensation will be reported to you on 1099 NEC. In prior years, this income was reported in box 7 of form 1099 MISC. So if you are a consultant or work for Uber or any other gig economy job, you will need to look for this form.
Common 1099 Forms
To help navigate the numerous forms here is a list of what you can expect to receive.
1099 INT: This is the form you receive for interest earned. You should expect one of these for every bank account that pays interest, no matter the dollar amount of interest.
1099 DIV: This form captures dividends paid to you. Correct classification of dividends on this form is crucial. Tax rates are lower for qualified ordinary dividends versus other types of dividend payments.
1099 B: You will receive this form if you sell stocks or mutual funds. This tells the IRS to look for possible taxable investment sales.
1099 MISC: This is the default catch all 1099 for income earned when you are not an employee. This form is provided to independent contractors and attorneys for gross compensation. If you are a sole proprietor, each of your customers that are billed over $600 should be sending you one of these forms.
1099 R: You will receive this form if you have distributions from a qualified retirement account during the year.
1099 G: This form captures governmental payments to you. You may receive one of these if you receive a state tax refund.
1099 SA: This form captures distributions from health reimbursement accounts like HSA’s and MSA’s.
What you need to know
- Use the information in this tip to ensure you are receiving the necessary 1099’s to file your tax return.
- To be sure, create a list to confirm receipt of the necessary 1099’s. Missing 1099’s is a common reason for a delay in filing your tax return.
- There are other types of 1099’s. If you receive a 1099 and are not sure what the form is, ask for clarification.
- When you receive the form, double check the accuracy of the form. If there are errors, try to get them corrected as soon as possible.
Remember, the IRS receives these forms. Their computers will run a cross-check against your return to ensure you have not omitted any of them.