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Essential facts to know about the 1099 tax forms
The Internal Revenue Service or IRS deals with the common issue of preventing taxpayers from not reporting or underreporting their income. To combat the problem of not having a clear understanding of financial transactions, the IRS employs the 1099 tax forms. It is an “information return” that is used by the IRS as a report of taxable incomes which can not be considered as salary or is not withheld. The 1099 tax forms are a series of documents with each being designated one or a number of alphabets. The different designations are employed to report the different kinds of income. They must be filled out with the IRS by the entity or the person making the payment, with another copy being handed to the payment receiver.
Types of 1099 tax forms to fill online
A worker who is self-employed or an independent contractor must receive the Form 1099-MISC from every business client that he/she works with and is paid. The amount should amount to at least $600 during the year of taxing. This would apply to people who undertake freelancing contracts with professions such as writing, consulting or art. The freelancers get hired by companies or individuals on a contract basis and the income received from each job must be listed or reported on the Form 1099-MISC.
Typically, banks generate these forms for people who hold interest-bearing accounts. The Form 1099-DIV is received by individuals who own a portfolio of mutual funds and stock investments. One must report all the dividends and distributions that are received during the term of the tax. The payments listed under this are those that are different from any earnings generated by selling the stocks. It includes the earnings of the corporation paid to the shareholder. The Form 1099-INT must be reported in the case of interest payments.
The Form 1099-G is used by government agencies to report the different state income tax refunds and compensations that are received by an individual during the year. This form ensures that even the state and the federal government report the income that is paid out to the taxpayers. For people who receive an unemployment income, they must include the same amount reported in the Form 1099-G under the taxable amount or income.
The money deposited in the traditional Individual Retirement Account is not taxable till the individual chooses to withdraw it. One will receive the Form 1099-R, which records the total number of withdrawals undertaken in the year. It also covers the different kinds of distributions that are received through annuities, pension plans, and profit-sharing plans.
In some instances, the number of transactions can cause a spike in the taxable amount even without receiving any payment. This usually occurs in a case where the creditor cancels the portion of any outstanding debt that may have been there. This leads to the IRS treating the canceled debt as one that is taxable. Thus, if a credit company or any other financial institution does not require for one to pay the outstanding balances, a Form 1099-C is required to report the debt that is canceled. The report must be used when filing tax returns.
Filling a tax return with 1099 tax forms online
Filing a tax return online is a fairly simple process with several online e-filing sites. One does not have to bother with the multiple, complex steps involved in figuring out the kind of forms to fill and the different numbers to enter. The online services are meant to aid one and guide them through the information feed as well as help them enter the correct information in the tax forms.
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