Friday, 17 May 2024

Understanding the Significance of 1099 Forms in Tax Preparation and Filing

Compliance with Kentucky state and federal tax laws and regulations is essential, or else penalties and interest may be levied on the accounts of tax delinquency. As such, disclosing your earnings from sources other than salary, if any, becomes pertinent. That’s where 1099 forms come in handy.

However, if you do not know which type of 1099 form you should get from your payer and when, you can seek expert advice from a tax advisor in Louisville, KY. They can provide you with all kinds of tax solutions, including the ones related to 1099 forms.

Importance of 1099 forms in tax filing 

A 1099 form is documentary evidence of receiving money from a person or entity other than your employer. It is the payer’s responsibility to fill out the 1099 form and provide copies to you and the IRS.

Here’s why a 1099-form is an important document:

  • One thousand ninety-nine forms help you determine the types and amount of income you’ve earned from sources other than your salary, which must be placed in your tax return.
  • A 1099 form contains your Taxpayer Identification Number and Social Security Number. A copy is also sent to the IRS to inform them that you’ve received money from a payer.
  • Receiving a 1099 form does not necessarily mean paying taxes; if you have made the requisite deductions, you can offset the taxes owed against a 1099 form.
  • You can expect your 1099 form from a payer by 31st January for the previous calendar year. However, some 1099 forms, like 1099-S, are received by 15th February. If you have not received your 1099 form by mid-February, the IRS recommends contacting your payer as soon as possible.

Various types of 1099 forms

While there are several types of 1099 tax forms, aka the information returns, the following are some used most commonly:

  • 1099-A: Received when a lender cancels some or all of the mortgage you owe.
  • 1099-B: Covers incomes from the sale of securities and barters. 
  • 1099-C: Received when a lender settles your debt for less than what you owed originally.
  • 1099-CAP: This form reports receipt of money or property due to a change in the capital structure of a company that you own shares of.
  • 1099-DIV: The dividends you receive are reported in 1099-DIV forms.
  • 1099-G: A 1099-G form reports the money you receive from federal, state, or local government. 
  • 1099-INT: You will receive a form 1099-INT if you earned $10 or more in interest from banks or other financial institutions.
  • 1099-K: This form provides a summary of 200 or more credit card transactions amounting to $20,000 for the sale of goods and services.
  • 1099-NEC: Companies issue this form to freelancers or self-employed individuals for reporting the payment.
  • 1099-R: It reports your earnings through retirement plans, an annuity, or permanent and total disability payment under life insurance.
  • 1099-S: You will receive this form when you close a real estate sale.