Not all 1099s are the same. Here’s what you need to know to understand how they fit into your tax picture.
You’ve probably received a 1099-INT tax form from your bank. It signifies it paid interest on your savings. Another may come from your state, attesting to its tax refund to you.
If you’re a freelancer or contract worker, you may have received a 1099-MISC from your clients. And if you paid independent contractors more than $600 each in a given year, you need to complete a 1099-MISC.
You’ll notice the forms have your Social Security number or taxpayer identification number, and that means the IRS will know that you’ve received money — and know whether you report that income on your tax return. Likewise, the IRS wants to keep tabs on the money you’ve paid contractors.
However, receiving the 1099 doesn’t necessarily mean you will have to write a check to the IRS come April 15. You may have deductions that offset the income — expenses, for example — if you’re a freelancer or contract worker.
So, which types of 1099 tax forms are likely to cross your path? Here’s a list:
- 1099-A — You may receive one of these if your mortgage lender cancelled some or all of your mortgage or if you were involved in a short sale of your home. The government considers canceled debt as a type of income, and it’s typically taxable.
- 1099-B — Income from the sale of several types of securities and some kinds of bartering on bartering exchanges. A 1099 isn’t usually required if you barter with someone directly, although that may not relieve you of reporting responsibilities.
- 1099-C — If a credit card issuer or other lender settles your debt for less than you owe, you still may owe money — the same as with a full or partial mortgage cancellation. The amount the lender forgives is likely taxable income, and the 1099-C will let you know.
- 1099-CAP — If you hold shares of a corporation that was acquired or underwent a big change in capital structure and you got cash, stock or other property as a result, expect to receive a 1099-CAP.
- 1099-DIV — This form reports dividends you received, though it doesn’t include dividends on your share account at your credit union. You’ll see that money on a 1099-INT.
- 1099-G — Have you received money from the state, local or federal government? A tax refund, credit or offset? You may receive a 1099-G. If you were on unemployment during the year, you may expect to see a 1099-G heading your way.
- 1099-INT — If you earned more than $10 in interest from your bank, brokerage or other financial institution, you can expect to receive a 1099-INT.
- 1099-SA — You’ll get one of these if you took a distribution from a health savings account. As long as you used the money for an approved purpose, this amount is not taxable, but the form serves as a record of the distribution.
This is just a brief introduction to an important and versatile tax form. The actual tax you may have to pay depends on multiple factors. Be sure to save all your 1099 forms, as well as records of any 1099 forms you issued, to discuss with a tax professional.
Get Help with Your 1099s
Rather than guessing about your 1099s, why not let the experts at KRS CPAs help? Contact Kelley DaCunha at [email protected] to get started.