You’ve probably seen a 1099 tax form before.
But do you know what it is?
The IRS requires businesses to send these forms for any payments made during the year. If you’re an employee, your employer will take care of this process for you. But if you’re self-employed or work as an independent contractor, then it’s up to you!
Don’t worry though, this article will walk you through everything you need to know. Read on to find out how a 1099 form works!
What Is a 1099 Tax Form?
What’s the purpose of a 1099 tax form?
The 1099 is a form that is sent to someone who has received income from a company. The purpose of the form is to make sure that the person, who has received the payment, pays the taxes on the income they have received. The IRS requires businesses to send one of these forms for every person they pay during the year, whether they are an employee or not.
Why does the IRS care? The IRS cares about this because they want to make sure that people are paying the proper amount of taxes on their income. Think about it.
If the 1099 form didn’t exist, then people would be able to have jobs without taxes being taken out. Freelancers, contract workers, self-employed individuals, all could earn a living, without paying a dime in taxes. This would be detrimental to the country.
Thankfully, most people understand the importance of taxes and want to pay their fair share. When individuals come short on taxes, it’s usually an accident. However, even if you accidentally short-change the IRS, the consequences can still be costly!
Did You Hire Contractors?
Has your company been using contractors? Then it’s your responsibility to provide 1099 forms to the contract workers you hire. This ensures they are taxed as contractors, not employees.
If a company fails to submit 1099 forms for each contract worker, trouble will follow. They could wind up owing a hefty penalty for not filling. The penalty is usually a set amount per form that was not filled out.
Are You a Contractor?
What should you do if you’re a contractor who doesn’t receive their 1099 form? First, you should contact the company that hired you and make sure they got your tax information. If so, then there’s a good chance that the 1099 form simply had an error in it and wasn’t able to be sent out.
If the company doesn’t respond to you, you’ll have to take matters into your own hands. First, call the IRS and report the company for not providing a 1099 form. The best thing to do is find out how many forms were not provided and then contact the IRS back with that information. Usually, this will make them more interested in pursuing the matter!
Understanding 1099 Miscellaneous Income
What type of tax form do you need for gambling winnings or royalties? Can you skip reporting the income altogether? Unfortunately, no.
Money that you win from gambling is considered taxable income. Even if you didn’t get a W-2, you still must report your winnings as income on your tax return. You can use a 1099 miscellaneous income form.
For example, royalties are also considered taxable income. A 1099 form will be provided to you by the company that paid the royalties. If your income comes from dividends then you’ll receive a 1099 D form.
The same goes for interest earned on savings. This might all sound confusing now, but with time it’ll become easy and familiar.
Once you fully discover the difference between a 1099 and a W-2, you’ll know you’re financial know-how is growing. Next, you can start learning the best ways to fill out your tax forms for efficiency.
How to Correctly Fill Out the Form
When you get your 1099, make sure it’s correctly filled out before sending it in with your taxes. If some of the information is incorrect, then you need to contact the company that sent it.
The information on the form includes your name as well as the amount you were paid. It also includes an ID number, which is like your social security number, that links the 1099 form to your W-2 file. This ensures all tax records are easily accessible and verified.
Are you self-employed? There’s a chance you might not receive a 1099 form if that’s the case. It’s still important to declare self-employment income, especially if you’re operating your own company.
Remember that even though you don’t receive a 1099 form, it doesn’t mean you shouldn’t pay taxes on the income. The IRS will be watching! If they find out that you failed to report any income, it’ll be a problem.
IRS 1099 Form Deadlines
Tons of celebrities, like Martha Stewart, Willie Nelson, and Nicholas Cage learned first hand the issues that follow tax evasion. Save yourself the headache by always following the IRS’s rules, like being on top of tax deadlines.
Make sure to take note of the filing deadline for sending your 1099 tax form in. If you choose to mail your 1099 form in, be aware that there are strict regulations on how a postmarked date can be considered.
Documents You Need
Lastly, make sure you bring all the necessary documents when you prepare your taxes. The most important document to have is your W-2. Without this, it might be difficult to identify your income and file correctly.
Be prepared for other forms as well that related directly to the type of income you received. For example, if you earned interest from a savings account, bring your 1099-INT.
If you received dividends, then bring your 1099 DIV. It’s also common to receive separate forms for unemployment income or pension payments. After all of this hard work and diligence, filing taxes will be easy.
Get Ahead of Your Taxes
Taxes can be confusing. Hopefully, this article was able to make things a little bit more clear by explaining what a 1099 tax form is all about. Be patient with yourself and soon, filing your taxes will be as easy as 1-2-3-4!
To get ahead of the game, take some time today to gather your tax papers. If you’re a contractor, create a full list of your income this year. If you’re an employer, verify that you have the contractor’s information so you can send out their tax forms. Then take a moment to explore the rest of our site!