WHAT YOU NEED TO KNOW ABOUT IRS FORMS 1099

WHAT YOU NEED TO KNOW ABOUT IRS FORMS 1099It’s that time of year again, when IRS Forms 1099 arrive. Perhaps no one likes IRS Forms 1099 except the IRS. The agency loves them, because they allow for the easy computer matching of Form 1099 data against tax returns. Businesses may not like sending the forms out, but there are penalties for failing to issue them.  Besides, no one wants trouble from the IRS. So as all the forms descend this time of year, here are things to know about Forms 1099:

  • Better to give than to receive. Generally, businesses must issue the forms to any payee (other than a corporation) who receives $600 or more during the year. That’s just the basic threshold rule, but there are many exceptions. That’s why you probably get a Form 1099 for every bank account you have, even if you earned only $10 of interest income.
  • Report every 1099. The key to Forms 1099 is IRS’s matching. Every Form 1099 includes the payer’s employer identification number and the payee’s Social Security number. The IRS matches Forms 1099 with the payee’s tax return. If you disagree with the information on the form but can’t convince the payer you’re right, explain it on your tax return. If you receive a Form 1099, you can’t just ignore it, because the IRS won’t.
  • There are many varieties. There’s a 1099-TNT for interest; 1099-DIV for dividends; 1099-G for state and local tax refunds and unemployment benefits; 1099-R for pensions and payouts from your individual retirement accounts; 1099-B for broker transactions and barter exchanges; 1099-S for real estate transactions, etc.  There are many categories, but the Form 1099-MISC (for miscellaneous) seems to prompt the most questions and covers the biggest territory.
  • Timing is everything. Businesses must now send out Forms 1099 by Jan. 31 for the prior calendar year. However, don’t assume you’re off the hook for reporting income if you don’t receive a Form 1099 by February or even March. There are penalties on companies that issue Forms 1099 late, but some come as late as April or May when you may have already filed your return. Even if you never receive a Form 1099, if you receive income, you must report it. You don’t need a 1099 to report income received.
  • Beware changed addresses. The information will be reported to the IRS based on your Social Security number regardless of whether you receive the form. Update your address directly with payers, as well as putting a forwarding order in with the U.S. Post Office. You’ll want to see any forms the IRS sees.
  • The IRS gets them, too. Any Form 1099 sent to you also goes to the IRS. The deadline is Jan. 31 for mailing some Forms 1099 to taxpayers, but the payer generally has until the end of February to send all its Forms 1099 to the IRS. This year (2017, for 2016 payments), the IRS has moved up the filing date for Forms 1099-MISC reporting non-employee compensation in box 7.  The reporting date to the IRS will now be the same as the due date for the forms to be issued to recipients, January 31.
  • Report errors immediately. If there is an error on a Form 1099 tell the payer immediately. There may be time for the payer to correct it before sending it to the IRS. If the payer has already dispatched the incorrect form to the IRS, ask the payer to send in a corrected form (document this request in writing).
  • IRS Notices. If you forget to report a Form 1099, the IRS will send you a computer-generated letter billing you for the taxes (CP2000 Notice).
  • Don’t ask. Keeping payers advised of your current address is a good idea, as is reporting errors to payers. In some cases, if you are missing an IRS Form 1099, you may want to keep quiet. If you are expecting a Form 1099, you know about the income, so just report that amount on your tax return. IRS computers have no problem with that. If you call or write the payer and raise the issue, you may end up with two of them, one issued in the ordinary course (even if it never got to you), and one issued because you called.

For more information, contact by phone or email

(314) 205-9595 or toll free 888-809-9595

INFO@ADVISORYGROUPASSOCIATES.COM

ADVISORY GROUP ASSOCIATES’ Tax & Advisory firms.

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