IRS Form 1099 season is upon us, when those annoying little tax reports come in the mail. They remind you that you earned interest, received a consulting fee, or whatever. There are many varieties, including 1099-INT for interest, 1099-DIV for dividends, 1099-G for tax refunds, 1099-R for pensions and 1099-MISC for miscellaneous income. These forms are sent by payors to you and the IRS.
Arguably the most irksome is 1099-MISC, which can cover just about anything. Consulting income, or non-employee compensation is a big category for 1099-MISC. But whatever you were paid in 2014, if it wasn’t wages on your W-2, it’s likely to be on a Form 1099. Companies big and small are churning them out. If you’re in business–even as a sole proprietor–you also may need to issue them.
Each form 1099 is matched to your Social Security Number, so the IRS can easily spew out a tax bill if you fail to report one. In fact, you’re almost guaranteed an audit or at least a tax notice if you fail to report a Form 1099. Even if an issuer has your old address, the information will be reported to the IRS (and your state tax authority) based on your Social Security number.
Make sure payers have your correct address so you get a copy. Update your address directly with payers, and put in a forwarding order at the U.S. Post Office. You’ll want to see any forms the IRS sees. It’s also a good idea to file an IRS change of address Form 8822. The IRS explains why at Topic 157 – Change of Address–How to Notify IRS.
Like Forms W-2, Forms 1099 are supposed to be mailed out by January 31st. You need a Form W-2 to file with your return, but do you really need a Form 1099? No. In contrast to Forms W-2, you don’t file Forms 1099 with your return.
Although most Forms 1099 arrive in January, some companies issue the forms throughout the year when they issue checks. Whenever they come, don’t ignore them. Each form includes your Social Security number. If you don’t include the reported item on your tax return, bells go off.
Nevertheless, if you don’t receive a Form 1099 you expect, don’t ask for it. Just report the income. Reporting extra income that doesn’t match a Form 1099 is not a problem. Only the reverse is a problem. One possible exception? The IRS suggests that if you don’t receive a Form 1099-R, you should ask.
However, don’t ask about most Forms 1099, including the common Form 1099-MISC. After all, if you call or write the payor asking for a Form 1099, the payor may issue it incorrectly. Alternatively, you may end up with two, one issued in the ordinary course (even if you never received it), and one issued because you asked for it. The IRS computer might end up thinking you had twice the income you really did.
For alerts to tax articles, follow me on Forbes.com. Email me at Wood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.
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