Deep into IRS Form 1099 season, many people are watching their mailbox for those tell-tale tax forms. Each Form 1099 is important, matched to your Social Security number. That way the IRS can spew out a tax bill if you fail to report one. But should you ask for one that doesn’t arrive? We’ll come back to that question. There is more angst this year than usual, since the IRS has changed the filing date for some Forms 1099.
This year, the IRS moved up the filing date–for IRS copies going to the IRS–to January 31, for Forms 1099-MISC reporting non-employee compensation in box 7. January 31 is the normal due date for the forms to be issued to recipients. But in the past, companies issuing the form had an extra month or two thereafter to send the forms to the IRS. This year, there will be many forms sent to taxpayers and the IRS simultaneously. That means less time to catch and correct errors.
Note, though, that the old delayed filing dates remain unchanged for Forms 1099-MISC that do not report in box 7. In general, IRS Forms 1099 remind you that you earned interest, received a consulting fee, or were paid some other kind of income. 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. Sometimes, you even receive a Form 1099 that reports more than you received.
There are different types of Forms 1099, and some of them you might need. But what about the common Form 1099-MISC? The most common is Form 1099-MISC, which can cover just about any kind of income. Consulting income, or non-employee compensation is a big category for 1099-MISC. In fact, apart from wages, whatever you were paid in 2016, is likely to be reported on a Form 1099.
Surprisingly, many people can’t wait for them to arrive. yet in my view, asking for one can be a mistake. If you find yourself wanting a form, you obviously know about the payment you received. Just report the income. You don’t need the form. The IRS does not consider it a mismatch if you report extra income that doesn’t match a Form 1099. Only the reverse is a problem.
And in my experience, asking can backfire. If you call or write the payer asking for a Form 1099, the payer may issue it incorrectly. Alternatively, you may end up with two, the first one that you didn’t receive, and the second issued because you asked for it. The IRS may get both, and the IRS computer may think you had twice the income you did. It happens.
Although asking can be a mistake, you do want to receive the forms if they are issued. So 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. Of course, 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.
It’s also a good idea to file an IRS change of address Form 8822. The IRS explains how to notify IRS. Keeping track of each Form 1099 you receive is important, but asking for the forms can sometimes mean you’ll end up with forms you might not need or that duplicate income. One settling for this common mistake is a Form 1099 for your lawsuit recovery. Generally, everything is income, including money for settling a lawsuit. One of the few exceptions is lawsuit recoveries for physical injuries. Forms 1099 can make your tax position more complex. That’s just one of 10 things to know about taxes on legal settlements.
What’s an exception to my suggestion not to ask about Forms 1099? The IRS suggests that if you don’t receive a Form 1099-R, you should ask. In other contexts, consider it carefully. Forms 1099 are important. In fact, you are almost guaranteed an audit or tax notice if you fail to report a Form 1099. Mistakes matter, especially now that the IRS has six years to audit, not three.
For alerts to tax articles, email me at Wood@WoodLLP.com. This article is not legal advice.
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