It’s almost tax time again and January is an important month for one of the most important tax forms of all: IRS Forms 1099. They usually arrive in late January or early February and report how much you paid in 2022. errors, so check them carefully. Each Form 1099 is tailored to your Citizen service number, so the IRS can easily issue a tax bill if you don’t file one. If you don’t include the reported item, you’re almost guaranteed an audit or tax return.
Even if a business has your old mailing address, the information will be reported to the IRS (and your state IRS) based on your social security number. Make sure payers have your correct address so you get a copy. Update your address directly with payers and place a forwarding order with the US Post Office. It’s also a good idea to report a change of address to the IRS Form 8822. The IRS explains how to notify the tax authorities.
Businesses must issue the forms to any beneficiary (other than a business) receiving $600 or more during the year. That’s just the basic threshold, but there are many exceptions. That’s why you’re likely to get a Form 1099 for every bank account you have, even if you’ve only earned $10 in interest income. The key is the IRS matching. Each Form 1099 contains the payer’s employer identification number and the payee’s Social Security number. The IRS matches Forms 1099 with the beneficiary’s tax return. If you disagree with the information on the form, but cannot convince the payer that you are right, explain this on your tax return.
There are many different forms and the latest is IRS Form 1099-NEC, which means additional taxes for independent contractors. There is 1099-INT for interest; 1099-DIV for dividends; 1099-G for state and local tax refunds and unemployment benefits; 1099-R for pensions and benefits from your individual retirement accounts; 1099-B for brokerage transactions and bartering; 1099-S for real estate transactions, etc. There are many categories, but the Form 1099-MISC (for miscellaneous) seems to raise the most questions. If you receive a payment, it will most likely result in one of these forms. For example, even a lawsuit settlement usually means an IRS Form 1099
There are penalties for businesses that issue Forms 1099 late, but some don’t come until April or May, when you may have already filed your return. Even if you never receive a Form 1099, you must report it if you receive income. You don’t need a 1099 to report income. The information is reported to the IRS based on your Social Security number whether or not you receive the form. Update your address directly with payers and place a forwarding order with the US Post Office. You want to see all the forms the IRS sees. Getting a transcript is a convenient way to double check your information. If there is an error on your Form 1099, tell the payer immediately.
There are many appraisals that companies must make when issuing these forms. For example, most court settlements are reported and in many cases the tax rules are not clear. For example, if you settled a lawsuit and received taxable damages, you report the payment as income. But if you have arguments that the lawsuit recovery shouldn’t be taxable, the last thing you want is a Form 1099. Some damages are tax-free under Article 104 of the tax code, but only physical injury and physical illness qualify. Receiving a Form 1099 can be especially concerning, because with some court settlements, legal fees cannot be deducted.