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.
Tax documents can be confusing at best and overwhelming at worst, serving to frustrate business owners and tax professionals who want to keep the filing process as simple as possible. Are you curious about the purpose of 1099 INT forms and how to file them? If so, read on – we will try to demystify this version of federal form 1099 and explain who needs to file it and why.
What is Form 1099-INT?
Form 1099-INT is the form used to report any interest income that a taxpayer receives during a tax year. Common sources of form 1099 interest are savings accounts, checking accounts, and money market accounts. In addition to regular interest earned, sign up bonuses, incentives, or other monetary gifts provided by banking institutions are also regarded as income by the IRS and must be reported on 1099 INT forms to the IRS as well as the recipients of the money.
Filing Form 1099-INT
Generally, institutions that pay interest have two choices when it comes to filing 1099 INT forms – manually or electronically. Any institution filing more than 250 1099 forms is required to submit them electronically, although there are distinct advantages to filing electronically even if you are creating significantly fewer than 250 forms. Businesses using online services such as Etax1099.com can create a single account and enter all of their form 1099 interest payments from this one account, making the process much easier and quicker. They can also more easily avoid making mistakes by using this method. Once the information is entered, a few clicks of the mouse submit the forms to the IRS, saving time and effort. Additionally, users who submit forms online will receive E-mail confirmation and updates regarding their submissions, keeping them up-to-date and in the loop.
Recipients of Form 1099-INT
If you do happen to receive a form 1099-INT from your bank, remember to include this information on your personal tax return. Deadlines for receiving your 1099 forms are generally the last day of January, so if you don’t receive it by then, be sure to contact your bank for more information. Banks are only required to report form 1099 interest if it exceeds $10, but even if you received less than $10 in interest, you are still required by the IRS to report your interest earned.
Filing and completing form 1099-INT does not have to be difficult or complex, especially if you are using an online filing service. With the ability to input multiple payees from a single account, business owners will appreciate the ease with which they can complete this process, making it one less headache to worry about during tax season. If you do encounter any problems during the filing process, Etax1099.com provides all of its users with round the clock customer service so you can avoid contacted the IRS directly. Once your forms are filed, submission is usually complete within 24 hours, making this by far the most efficient way to handle any reports of form 1099 interest.