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Monday 17 March 2014
What Is A Form 1099 Used For?
A Form 1099 is considered an information return by the
United States Internal Revenue Service. It's used to report income earned in
each calendar year for tax purposes. There are 13 different types of 1099 forms
used for a variety of information reporting requirements. Employers and
employees must furnish these forms to the IRS.
1099-MISC
The 1099-MISC reports miscellaneous income, which includes
freelance work, nonemployee fees, rents, director's fees, royalties and
attorney's fees, as well as direct sales of $5,000 or more of consumer goods
for resale.
1099-G
A 1099-G is used to report certain government and qualified
state tuition program payments. These items include unemployment benefits,
taxable grants, and state and local income tax refunds.
1099-B
A 1099-B reports proceeds from broker and barter exchange
transactions, which include sales or redemptions of securities or commodities.
1099-DIV
A 1099-DIV reports distributions and dividends, such as
capital gain and nontaxable dividends that were paid on stock.
1099-S
Gross profit from the sale or exchange of real estate must
be reported on Form 1099-S.
1099-INT
Any interest earned during the year must be reported on a
Form 1099-INT.
What to Do If My Receipts Do Not Match My 1099?
If you're self-employed or perform contract services, you
may receive 1099s from your customers at the end of the year. 1099-MISC forms
show income you receive for services you provide, but you may not receive a
1099 from every customer. For example, if a customer paid you less than $600
for work, he is not required to send you a 1099. Because of this, it is common
for self-employed individuals to have discrepancies between invoices and the
amounts reported on 1099 forms.
1099 Reported to IRS
When you receive a 1099 from your customer, your customer
furnishes the same information to the IRS. This means the IRS has your
self-employment income information in their system and expects to see a
reflection of the 1099 income on your tax return.
Receipts Total More than 1099
If your gross receipts total more that your 1099 amounts,
report the amount of your gross receipts as income. Because you may not receive
1099s for all the income you earn as a self-employed individual, your gross
receipt amount is probably more accurate. Many self-employed taxpayers use a
cash basis method for accounting purposes. This means you report income and
expenses in the year you actually receive the money or pay the bill. If you
operate using the cash basis method, make sure you exclude unpaid invoices from
your gross receipt calculation before you report the income.
Receipt Total Less Than 1099
If your gross receipt total is less than the amount reported
on your 1099, you'll need to determine which figure is accurate. If you earn
less than the amount shown on your 1099s, you may have an erroneous 1099. For
example, if you charge a customer $700 for a job and receive a 1099 from the
customer that shows you received $7,000 for the job, you have an erroneous
1099. If your 1099 forms are accurate, go through your bank statements and
match your self-employment income deposits to your invoices. Make sure you
recorded all your receipts correctly. Since the IRS retains all 1099
information received under your Social Security number, you should attach a
statement to your tax return when you receive erroneous 1099 information.
Reporting 1099 Income
Most 1099-MISC income you receive as a self-employed
individual is reported on IRS Schedule C, Profit or Loss from Business. If you
have business income in addition to your 1099 income, total all amounts and
report the income on line 1 of Schedule C.
How to File a 1099-G with E-File
People receive a 1099-G for receiving any agricultural
compensation, taxable grants or unemployment compensation in the previous tax
year. The 1099-G is a form from the Internal Revenue Service (IRS) that allows
you to keep track of how much money you have received from these benefits, how
much was taken out for taxes and how much you must report. You must report this
amount on Form 1040 upon filing for taxes through the IRS's e-file
service.
Log in to the IRS Web site (see Resources). Create a profile
with the IRS; this is required prior to being granted permission to e-file.
Select "Free File" when presented with your options. Continue
completing the form, which will ask you numerous questions, including your tax
credit eligibility, income limits and filing status.
Enter your personal information, which includes your name,
birth date, Social Security number, phone number, address and e-mail address.
Create an online PIN number; this allows you to return to the filing
application at a later date without having to re-enter your information.
Confirm your PIN. Open the e-mail that is sent to your
e-mail address and click the link inside. Log into the e-file system once more
with the now-verified PIN number. Choose the correct filing method.
Determine whether you can fill out the forms yourself or you
require a guide. The IRS recommends you be guided through the program to
prevent filing incomplete forms.
Find line 10 on Form 1040. Enter how much you received as
reported on your 1099-G. It may not necessarily ask you to do this, but it may
in the form of "Did you receive unemployment compensation last year?"
Here, you must enter the amount.
Double-check your 1099-G before e-filing. Ensure the 1099-G
amount is on Form 1040 on line 10. This will be on the first page.
IRS Form 673 Instructions
The Internal Revenue Service (IRS) allows certain US
taxpayers working in a foreign country to take a tax exclusion from a limited
amount of their foreign earned income. The IRS defines “foreign earned income”
as income earned from work performed in a foreign country. To qualify, the
taxpayer must live in and maintain a tax home in a foreign country for an
entire tax year or be in the foreign country at least 330 full days during a
12-month period. The limit on the exclusion as of 2012 is $95,100. Taxpayers
must file Form 673 with their employers so that the employer withholds the
proper amount of federal income taxes.
Print your name and social security number on the lines
provided above “Part I” on Form 673.
Write the calendar year you intend to qualify for the
foreign earned income exclusion on the line provided under Part I next to the
text “calendar year.” Use the other lines if you are going to qualify for the
tax exclusion for a number of tax years.
Check the appropriate box indicating that you qualify for
the deduction. Use the “Bona Fide Residence Test” box if you live in the
foreign country for an uninterrupted period of 12 months and plan on continuing
to live in that foreign country for another uninterrupted 12-month period. Use
the “Physical Presence Test” box if you live in the country for at least 330
days during the course of a 12-month period. Write the name of the foreign
country on the lines following “my tax home in” and write the dates on the
lines that follow.
Estimate the expenses you intend to incur during the time
you live abroad and write the amounts on the lines provided in Part II of Form
673.
Sign and date the form. Send the form to your employer.
When Is the Vendor Eligible for 1099?
Businesses hire vendors to supply services or goods such as
freelance services, consulting or merchandise. These individuals and businesses
are not employees of the company and do not receive employment benefits. For
that reason, an employer does not withhold any or all taxes or insurance from
the payments given to the vendors; it is the vendor's responsibility to pay
them. At the end of the tax season, the business is responsible for sending the
vendor a 1099 form to report to the Internal Revenue Service, or IRS, any
earnings made from the business.
Vendor Eligibility
A 1099 recipient is an individual person, a sole proprietor,
a business partnership or other providers of service. These recipients may
receive a 1099-MISC, 1099-INT or 1099-G. A company is responsible for sending
each vendor the appropriate form during the following tax year for services or
goods for the previous year. A company also has the responsibility of filling
out IRS Form 1096 and sending it to the IRS. This form notifies the IRS of
these payments and the responsibility of the vendor paying taxes on the
payments. During this time, a company must have an accurate Federal Identification
Number or Social Security number to issue a 1099 form or else the company may
incur penalties.
IRS Form 1099-MISC
Companies will use IRS Form 1099-MISC to any vendor that
received at least $600 for services or goods during the previous tax year, at
the time of publication. Additionally, any vendor in which the company withheld
federal tax for will receive a 1099-MISC. For example, company A provided you
with $735 worth of material to build your product and is eligible to receive a
1099-MISC. On the other hand, company B only provided $535 for materials and
will not receive a 1099-MISC unless the company withheld federal tax on the
payment. Brokers who receive at least $10 instead of receiving dividends or
interest will also receive a 1099-MISC.
IRS Form 1099-INT
Businesses use IRS Form 1099-INT on payments of $10 or more
in interest, domestic or foreign, or when withholding federal income tax for a
vendor. For example, if a business purchases an item or service on credit and
pays a percentage rate, the vendor would receive a 1099-INT for any interest
paid to him over $10.
IRS Form 1099-G
Vendors who receive payment for certain natural resources,
forestry or conservation grants will receive IRS Form 1099-G. For example, if a
company gives a grant to a vendor to research methods to produce goods with the
least harmful effect on the environment, it will receive a 1099-G. A vendor is
also eligible for this form if a company pays $10 or more towards tax refunds
or unemployment benefits for the vendor.
How to Read Your 1099-INT Form
How to Read Your 1099-INT Form. Not all interest income is
taxed the same way. There are a few different kinds of interest income and they
are reported in different boxes on the 1099-INT. This article shows you how to
understand what you see on your 1099-INT.
The first couple of boxes on the 1099-INT are pretty
straightforward. Box 1 of your 1099-INT form shows regular taxable interest,
like bank account interest, that is taxed as ordinary income (meaning at your
top marginal tax rate.)
Box 2 of your 1099-INT shows any amount you paid in early
withdrawal penalties from CDs or other securities. This amount can be carried
to Schedule A of the 1040 as a miscellaneous investment expense.
Box 3 of your 1099-INT shows interest you received from U.S.
Government securities, such as T-bills, notes and bonds. This income is only
taxable at the federal level. No state or local tax is assessed on U.S. Government
interest. Some of this interest may be excluded from taxation altogether,
depending upon certain factors. The numbers from boxes 1,2 and 3 are all
carried to Schedule B of the Form 1040.
Box 6 shows foreign tax paid. This is tax that you paid during
the year on a foreign investment, such as an international mutual fund. This
number will be carried to the 1040 and used as either a credit or deduction.
Box 8 shows tax-free interest, such as interest that is paid
from a municipal bond. This number is also carried to the 1040 to be used in
performing certain calculations.
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