They are starting to arrive in the mail. Tax forms. You may get several in any given year. Maybe you are familiar with your W-2, the form you receive from your employer. But you could get several 1099 forms from several different sources.
If you are an independent contractor or freelancer you will get a 1099 Misc from every company or person you worked for. This is an information return and it is used to report payments to you.
What if you don’t get one from work you performed over the year? Go back to your records and report those payments as income when you file your taxes. Even though it is the responsibility of the person or company that pays you to report your income, it is equally your responsibility to report income you received, whether they did their part or not.
You may also receive a 1099 from your bank for interest earned, or if you received stock dividends or a mutual fund distribution you will be getting a 1099 DIV.
What you may not know is that if you get a large loan forgiven, such as a mortgage, you will receive a 1099 C for the cancellation of the debt – which now becomes income to you.
There are several other reasons why you might receive a 1099 Form, such as rents received, receiving unemployment benefits, so make sure you understand what the income was for so that you can report your expenses accordingly.
If you received a tax refund from your state you will received a 1099 G and if you itemized deductions the previous year that refund is taxable in the following year.
Say you are a big ebay seller and made big bucks last year. You will receive a 1099 from PayPal or other merchant processing service stating those income amounts. Here is where you will be glad you have kept good records because PayPal won’t know how much you paid for that grandfather clock at the yard sale which you then sold on ebay, they will only be able to report how much you received from buyers. Your expenses reported alongside will ensure that you will not pay taxes on more than your profit.
Along with the 1099 sent to you is a copy sent to the IRS – this information may be matched by the IRS to your return so it is important to include every 1099 amount on your return with your explanation of how much of that income was expenses and how much was profit.