Q: I just received a 1099-MISC form from my employer. I’ve never received this before. What is it and what am I supposed to do with it?
A: Turbotax tells us that the 1099 form is a series of documents the IRS refers to as informational returns. There are a number of different 1099 forms that report the various types of income you may have received throughout the year other than the salary your employer pays you.
The IRS considers any 1099 payment as taxable income. You must report it. 1099s are often used for independent contractors or self-employed individuals. Whoever pays you is responsible for filling out the proper 1099 tax form and sending it to you on or before Jan. 31. When a 1099 form is sent to you, it is also reported to the IRS. So even if you forget to include it in your tax return, the IRS will more than likely notify you if you owe additional taxes on the unreported income. The IRS will also more than likely charge you penalties and interest beginning on the first day your tax payment is considered late. So be sure to include the 1099 info in your tax return.
According to the IRS, employers should file Form 1099-MISC for each person to whom you have paid at least $600 during the year:
▪ in rents;
▪ services performed by someone who is not your employee;
▪ prizes and awards;
▪ other income payments;
▪ medical and health care payments;
▪ crop insurance proceeds;
▪ cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish;
▪ generally, the cash paid from a notional principal contract to an individual, partnership, or estate;
▪ payments to an attorney; or
▪ any fishing boat proceeds.
The form is required anytime an employer pays at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.
In addition, use this form to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.
If you have already filed, you can amend your tax return. It’s best to do that before you receive a notification from the IRS. You can check with IRS or your own tax professional to get assistance.
There are other 1099 type forms used by the IRs. For more information on how and when to file go to www.irs.gov/filing.
Action Line is written by Blair Looney, president and CEO for the Better Business Bureau serving Central California. Send your consumer concerns, questions and problems to Action Line at the Better Business Bureau, 2600 W. Shaw Lane, Fresno, CA 93711 or email@example.com.