Form 1099: Are You Doing Your Taxes Right?

Industry: Accounting, Payroll and Taxation        Added By: 247Compliance        Posted On: Nov. 20, 2019

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If you have been paying your taxes in the U.S., you must know what Form 1099 is all about. Well, over the years, the Internal Revenue Service or IRS has introduced many modifications that you must comply with in order to stay aloof of the income tax raid. Other than the taxes that you owe to your employer, who pays your salary, with Form 1099, you are also liable to pay taxes to any other entity or person who pays you a certain amount of money in form of your salary. This article discusses various types of Form 1099, and how they can be relevant for you to file taxes.

Form 1099 - MISC for independent contractor income 

If you are employed by an independent contractor and is paid on partial or a regular basis for an amount over $600, then you need to file your taxes with Form 1099-MISC. This stands for every individual entity/contractor who pays you. If you are a permanent employee at any organization involved in paying taxes, you need to comply with Form W2. The Form will be given to you directly by the bank that credits you the salary.  

 Form 1099-DIV & INT for yearly dividends, stock, and mutual funds’ investments

If you own investments in mutual funds, stock market, and get some returns from these institutes, you are liable to file taxes with Form 1099-DIV. With other types of investments than the stock market and mutual funds, you may pay periodic interest rather than dividends. However, these periodic interests hold taxes which you are liable to pay with Form 1099-INT. The form is generally distributed by the bank in which the bearer holds the value of interest.

Form 1099- R for your retirement account

The IRS also implies tax returns on your retirement account. So, if you are withdrawing a certain amount of money from your retirement account, and you become liable to pay taxes on this account. You can file these taxes with Form 1099-R, which you will receive at the end of the year having a summed-up record of your total withdrawal for the year. The form also has tax distribution on entities which are liable to taxes, such as pension plans, annuities and profit-sharing plan, retirement plan, IRA or annuity.

Form 1099-G for government payments

If any of the local, states, federal government entities is entitled to pay you some amount, Form 1099-G is what you will be required to file your taxes on the amount received from the government. The form will also be applicable if you claim any unemployment income during the entire span of your unemployment. It becomes mandatory for you to include the entire amount of your state reports on the 1099-G form in your taxable income.

Form 1099-C for debt collection

Taxes on debt collection do exist! The negotiated amount that your lender waived off while accepting the borrowed money, Form 1099-C will detail the tax which you are liable to pay on the negotiated amount. In general, you will have to pay taxes on the amount over which your lender has cut some slack on. This is sometimes also called as taxes on the canceled debt amount. However, if you can demonstrate your insolvency at the time of your debt cancellation, you will be able to avoid taxes on that debt.

The IRS makes sure that your every source of income is subject to taxes, whatsoever. Be it of any type, a form for 1099 has your Social Security number or taxpayer-identification number on it, meaning, all the activity/transaction, such as receiving or withdrawing money, relating to your account number can be effortlessly tracked by the IRS — and it will know if you don’t report that income on your tax return. It, therefore, becomes mandatory for you to be updated with recent changes with Form 1099, and pay your taxes on time to avoid any future hassle.