Every year around tax filing time as the deadline draws closer many employees scramble to file their taxes, however many seem to make the simplest mistakes that may end up costing them in the end. Some even meet the unfortunate fate of having Uncle Sam knock on their door or more realistically come to the mail to open an audit notification from the IRS. For those that don’t know 1099 forms are for people that are self-employed, have stocks dividends, capital gain distribution, and those who are receiving unemployment benefits. They are given to the employee from the company that has made them an independent contractor and pays them over $600 for their services. The company has a copy, and they send you the form to fill out as well. So before you file here are a few tips that may help 1099 employees avoid these common pitfalls.
To not be confused there are several types of 1099 forms to file. Don’t file the wrong one are you will get fined from the IRS, 1099-DIV is for those that need to report stocks and dividend, and capital gain distributions. 1099-MISC is for those that are an independent contractor, real estate disbursements, and tips. It is also the one form you will fill out if you are considered an employee. 1099-INT, to report interest income, and several other variations of the form. They all can be found at the IRS website.
Make sure the information is accurate. Report your income that you make right. Not only do you have copy of your 1099, but the company, and the IRS have the copy that the company has sent them. So whether you report the correct information or not, the IRS already knows what it should be, if you report less than earned income they will tax you, add on interest to the tax you owe, and probably audit you.
Always, always, always file the W-9. People seem to always make this common mistake, but it could its the law and you must fill it out if you are hired as a independent contractor. You just feel out basic information about your contractor, so that the IRS and government can see that it is with compliance with the law. It doesn’t matter the age, if you made more than $600 from the contractor you must report it.
It is important to note that the 1099 form is not a tax return but instead valuable information that the IRS needs, you still need to file you 1040 and input the information where designated from your 1099. Make sure when filling out the 1099 that you have right account number if you have to file multiple 1099-MISC. Just like filing your regular tax returns, remember to sign and date all your pages. Include the right social security number, and do correct math. If needed always have a professional look over your form or use a tax software, if you don’t want to take chances.