The IRS features innumerable forms which are found cumbersome by most taxpayers while filing the tax returns. This agony can well be lessened by having a very clear understanding of these forms and the correct procedure of filling these forms. 1099 IRS forms are one of the most significant IRS tax forms covering different types of income apart from salaries, guidelines and wages. Tax payers are not required to submit the copies of these forms with their Form 1040 while filing them on paper. Tax payers get the flexibility of filing form 1099 online and this is something that has come as a great benefit for the tax payers.
Different Types of Form 1099
There are different types of 1099 IRS forms among which the most common ones are forms 1099-INT, SA-1099 and 1099-R. Apart from these three common 1099 forms, there is the form 1099-MISC which is used by various businesses for making payments that do not fall under other categories of form 1099.
Form 1099-INT or Interest Income
This 1099-INT form is generally issued by the brokerage or the banks to the customers possessing mutual fund accounts. These are issued to tax payers who accumulate more than 10% interest in all the accounts combined during a financial year.
Form 1099-R or Distribution from Retirement Accounts
This form highlights any money which might have been moved by a particular tax payer. It is generally triggered by certain regular activities including moving money from traditional IRS to Roth IRA. This form can also be triggered with the simple withdrawing post retirement.
SSA-1099 or Social Security Benefits
This form is generally issued to retirees when they start receiving Social Security benefits. This form is issued annually and it details the amount send to an individual; the amount the retiree was required to repay from the previous year and the amount of the federal taxes withheld. This form is quite important because it shows certain benefits that might be taxable especially if the benefits have income from various sources. The other forms falling into the category of IRS 1099 forms include 1099-A, 1099-B, 1099-C, 1099-CAP, 1099-LTC, RRB-1099, RRB-1099R, W-2G, 1099-OID, 1099-PATR, 1099-S, 1042-S, 1099-Q, 1099-H, SSA-1042S, 1099-G, RRB-1042S and 1099-SA. It is to be noted that all these forms can easily Efile 1099 online without going through any hassle.
Online Filing of Form 1099
It is easy to file form 1099 online by taking the services of some of the best service providers in this field. There are some dependable sources that can always be of good help in filing 1099 forms online and their services should always be hired in order to save oneself from any kind of problem while filing them in person.
There are different types of IRS Form 1099. To be very precise, there are a total of 16 and all these form 1099 varieties serve one general purpose- to provide information to the Internal Revenue Service about earnings from non-employment-related mediums. It is mandatory for the payers of these income types to send a copy of the form 1099 to IRS and a copy to the recipient who makes the payments. The recipient is actually the taxpayer. The payers must also send one copy of the form to the state tax authority of the taxpayer and even keep a copy for their own reference.
A Targeted Tax Device
Very similar to the other types of tax forms, the IRS Form 1099 encourages people towards reporting all their earnings enabling the IRS to collect full taxes that it owes to the taxpayers. According to the IRS, form 1099 enables the IRS to improve collections and increase intended compliance. This is the main reason why form 1099 is called information return technically. Form 1099 serves as an effective device that helps the IRS in collecting taxes. IRS compares the reported income of the taxpayers on form 1040 alongside the information reported on 1099s and various other forms like the W-2. The W-2 form is used by employers for reporting the salaries and the wages that they pay to their employees. The computer checks carried out by the IRS enable the organization to collect taxes on un-reported income.
Factors to Consider when Dealing with Form 1099
There are some important factors that you need to consider when dealing with IRS Form 1099 and they are as follows:
Errors should be Reported Immediately
Do not just keep receiving the 1099s. You must check the forms for errors and if you find any errors, report them immediately. The payer must instantly be informed of any error in the form because if there is time, the payer might be able to correct the error prior to sending the form to the IRS. In case, the incorrect form has already been dispatched by the payer, you must request the payer to send a corrected form.
Every 1099 Must be Reported
IRS’s matching is the key to all 1099s. The Social Security Number of the payee and the Employer Identification Number of the payer is included in each and every form 1099. The IRS compares and even matches the 1099s with the tax return of the payee. Thus, you need to keep in mind that you cannot ignore form 1099 if you receive it because the IRS will not do so.
In case, reporting form 1099, goes completely out of your mind, the IRS will probably send a computer-generated letter to your address billing you for taxes. In circumstances where you find the letter to be absolutely correct, you need to pay your tax returns.
Independent Contractors Often Overlook Number Of Deductions As Applicable In Form 1099 And It’s For Their Look Of These Tips For Tax-Savings
One can save on medical expenses cost which is dollar to dollar deductions. This can add up quickly to save money for independent contractors when they make medical expenses out of pocket.
Independent contractors can deduct a standard mileage rate for every time when they used their car towards business. But it is always safe to keep a detailed log in their car to justify deductions in case of an audit.
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If independent contractors or entrepreneurs have their home as office then they are allowed to deduct a portion of the rent or mortgage. The amount is based on the percentage of their home that is a dedicated home office size of space and other rules will apply. The deduction doesn’t end with what one pay for the space, however, they can also deduct a percentage of the utilities and homeowner’s or renter’s insurance.
With regard to business gifts, independent contractors are allowed to spend $25 towards presenting a bouquet of flowers towards client’s visits and are absolutely and totally deductible. In case of entertaining with a bottle of scotch at $100 for the clients or new business prospects including the fellow contractors and entrepreneurs, $25 is deductible. One should have bills to justify accounts and be preserved during an audit.
Concerning Business travels, Independent contractors have upper hand in claiming most of their deductions during their business travel. They can deduct most of the costs made towards business cause. However the personal expenditures of buying things for their homes during business visit will be disallowed and there are more such exceptions. Tax professional can guide Independent contractors to the right way of tax deductions especially for frequent business travels.
Independent contractors and entrepreneurs, Have all your bills intact for all your exact deductions before you e-file your IRS form 1099 through IRS certified service partner http://www.Etax1099.com
The Schedule Of 1099-K is the Rule of IRS as a Tool to Improve Voluntary Tax Compliance as Mandatory
The year 2012 saw a new schedule through the rule of IRS in the form of 1099-K where in to improve voluntary tax compliance by business taxpayers as mandatory. The business entity like a payment settlement entity (PSE), a domestic or foreign organization, that acts as a bank and operates under the contractual obligation to make payments to participating payees who do not conduct transactions directly with payers. A PSE must file Form 1099-K for payments to the payee made by payment card transactions or in settlement of third-party payment networks. In the case of third-party entities, gross payments to the payee must exceed $20,000 and there must be more than 200 such transactions during the tax year.
For purposes of the form, a reportable payment transaction is a transaction in which a payment card (such as a credit card or gift card, debit card, prepaid telephone cards etc.) is accepted as payment or any transaction that is settled through a third party payment network like PayPal. It does not include ATM withdrawals, cash advances against a credit card, a check issued in connection with a payment card, or , any transaction in which a payment card is accepted as payment by a merchant or other payee who is related to the issuer of the card. Form 1099-K allows the U.S. government to track the rapid growth of e-commerce as a means of conducting business and ensuring that those who receive income from online transactions are reporting it and meeting their tax obligations.
More simply, the 1099-K allows the government to monitor sales of goods and services through payment cards and websites like PayPal and Amazon. It also provides income verification to the businesses that use either payment cards or third parties to obtain money from sales. The issuing of this form is also an opportunity for businesses to reconcile any discrepancies noted between their total gross receipts reported and the 1099-K information they receive.
In simple terms, taxpayers who have a credit card merchant account, PayPal account or similar account and otherwise meet the criteria will receive form 1099-K from their service provider. That would include professionals like lawyers and architects who accept online or credit card payments for services, freelancers compensated via PayPal and Etsy sellers, affiliates, eBay merchants and other small businesses who accept credit cards, debit card or PayPal as payment.
This form 1099-K needs to be filed by merchants by January 31 but where-as the Payment Settlement Entity must file to the IRS by April 1 electronically or by February 28 via paper file.
The IRS has many tax forms that taxpayers must file each year, but some are less known than others. The 1099 form is the second most popular tax form a person will file for their tax year, with the most popular being the W2 form. Understanding what the 1099 is used for, and why it should be filed, can help you determine if you will have to file this form this coming tax year or not.
What is a 1099 Form?
A 1099 form is very similar to a W2, in the sense that it states how much somebody has made for various services. There are several different 1099 forms, but two of the most popular are the 1099-MISC and the form 1099 interest. The 1099-MISC is the most basic form of a 1099 and is fairly simple to navigate. This is the form that a payer will send out to a payee in order for them to correctly file their taxes. Each year Payers of miscellaneous services must file the 1099 form so that the IRS is notified who is receiving income that hasn’t been previously taxed. Another popular version of the 1099, is the 1099-INT form. 1099 INT forms are filed when the payer has paid out interest payments during their tax year. 1099 INT forms are used report tax-exempt interest only. Taxable interest can be reported and filed on a 1099-OID form.
Who Should File a 1099?
If you have supplied goods or services to a business, you should receive a 1099 in the mail before February of the tax paying year. Typically those who are considered to be freelance workers are the people who get these forms the most. A lot of businesses may choose to outsource various jobs to freelancers. This allows the company to avoid paying overtime, and sometimes benefits. Those who take on the outsourced work and complete their job will be paid an amount that has not been taxed. Once tax season arrives it’s the freelancer’s responsibility to file their tax forms and claim any untaxed income they’ve received throughout the year. If for some reason you don’t get a tax form in the mail, the IRS has a copy on file, and they will send it to you. If the number on the form is different from the number you are claiming, you may need to speak to the company who filed the initial form. There are penalties and interest that will be imposed should a taxpayer not claim all their income or file their taxes at all.
All taxpayers should keep a close eye on their earnings throughout the year, especially if taxes aren’t being taken out. The IRS suggests that taxpayers who will have to pay out at the end of the year – which is typically the case with untaxed income – pay in quarterly. Paying quarterly allows freelancers to pay their taxes four times a year, rather than one lump sum in April. First-time freelancers may want to meet with an accountant who can help them understand what tax breaks they qualify for. Accountants are so helpful with filing the tax forms, as well. Tax season is never easy, but understanding how to file the forms required, such as form 1099 interest, can make the process easier in the long run.