How to Find Write Offs for a 1099

Having 1099 income indicates that you are an independent contractor and not an employee. When you are an employee, you should receive a W-2 from your employer at year's end. Earning 1099 income often indicates that you may have associated expenses that may be tax deductible. Always use caution in evaluating potential deductible expenses and get professional advice to reinforce your position.

Keep records of all your expenses. Record them as they occur or, at a minimum, put receipts in a large envelope for later review.

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Determine if you have direct expenses related to earning your 1099 income. For example, if you design websites or complete word processing assignments in your home office, your computer, printer, Internet connection and telephone may generate expenses directly related to your 1099 income.

Estimate any indirect expenses that may be associated with producing your 1099 income. For instance, your home office desk, chair and other business furnishings may have some deductibility, but if you only spend an hour or two per day producing income, you may have trouble convincing the IRS. Other more significant indirect expenses -- some of your rent or mortgage, heat, other utilities, home insurance, and repairs or maintenance -- may be deductible if your home office is your principal business location and is used exclusively to produce income.

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Consider deductions for the use of your vehicle. Some auto expenses may be deductible if you need to use your car for directly related business purposes. If you commute to and from your work site, these miles are not deductible. If you visit clients, make deliveries or transport people or products, you may generate write offs against your 1099 income.

Deduct the cost of any special clothing, using special tools or instruments, or completing education necessary to maintain or improve your ability to perform your current position.

Get a tax professional to review your work. A good adviser will typically save rather than cost you money.

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How to Correct a 1099 Misc Mistake for a Previous Year

The Internal Revenue Service (IRS) requires that miscellaneous income paid to persons in the course of trade or business during the year be reported using the miscellaneous income information return 1099-MISC. This includes payments such as rents, royalties, non-employee compensation, gross attorney proceeds and other types of income. Certain payment types such as rent, non-employee compensation and health care services must exceed $600 before completion of the form is required. The IRS provides guidance on correcting errors made when completing the 1099-MISC form

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Determine the type of error that was made in the prior year. Errors such as an incorrect code, amount or payee name or address can be corrected using one form and are considered type 1 errors. Errors such as an incorrect or lacking payee TIN or incorrect name and address require you to make the correction using two forms and are considered type 2 errors.

Correct type 1 errors by completing a new 1099 form for the year in which the mistake was made. Check the box labeled "Corrected" at the very top of the 1099 form. Correct the field that contains the error and update the rest of the form with the information reported in the prior year. Complete and submit an updated Form 1096, Annual Summary and Transmittal of U.S. Information Returns, to the IRS.

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Correct type 2 errors by completing a new 1099 form for the year in which the mistake was made. Check the box labeled "Corrected" at the very top of the 1099 form. Complete all payer and recipient fields with the same information that was included on the form that contained the mistake. Enter zero in the amount fields 1 through 18. Next complete a new 1099 form for the prior year with the correct information. Do not check the box labeled "Corrected." Complete an updated 1096 form, Annual Summary and Transmittal of U.S. Information Returns, with the updated information. In the bottom margin of the form, write the words "filed to correct" and briefly state the correction. Submit to the IRS the corrected 1099 and the new 1099 for the prior year and the updated 1096 form.

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Can an Individual Issue a 1099?

A 1099 is an information return that the Internal Revenue Service requires to report certain types of income, such as income paid to an independent contractor. Though businesses and corporations may issue most 1099 information returns, there are some situations that may require an individual to issue a 1099.

1099-MISC

There are several different versions of the 1099 information return. 1099-MISC is one of the versions most commonly used by individuals. You must file a 1099-MISC for every individual to whom you paid certain types of miscellaneous income during the year. The IRS uses these forms to determine the tax liability of the payees, and the payees must use the form to complete their federal tax return.

Reasons for Issue

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Individuals may file a 1099-MISC to report money they paid to another individual for rent, royalties or prizes. An individual may use 1099-MISC if he owns or operates a fishing boat and made payments to crew members. If an individual employs an independent contractor to perform services such as yard work or odd jobs and pays him more than $600 during the year, he must also issue a 1099-MISC.

Procedure

If you must file a 1099-MISC for income you paid to an individual or entity, you must obtain the payee's taxpayer identification number, correct address and other relevant information by providing him with Form W-9. You must use the information on the W-9 to complete the 1099-MISC, and you must provide the payee with a copy of the form by January 31. You must also file a copy of the form with the IRS by February 28 if you file on paper or by March 31 if you file electronically.

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Considerations

If IRS guidelines require you to file a 1099 and you fail to do so, you may be subject to a penalty of up to $100 for each return you fail to file. You may also owe a penalty if you fail to file your 1099s on time, or if you don't provide them to payees by January 31. However, you won't owe any penalty for a payee who fails to report his income as long as you provide him with the proper documentation

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What are a W-9 Form and a 1099 Form?

With so many rules, forms and considerations, tax season can be very complicated for many Americans. Taxes can be exceptionally difficult for independent contractors who don't already have taxes taken out and typically receive W-9 and 1099 forms. Although there is a correlation between these forms, understanding the purpose and details of the W-9 and 1099 forms is necessary to avoid trouble with the IRS when documenting and filing taxes.

The W-9 Form

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The purpose of the W-9 form is simply to formally request a taxpayer identification number (TIN). W-9s are commonly provided to independent contractors by a company or organization so that it can properly document payments made. It is the responsibility of the payee to provide the correct TIN number, which in most cases in the same as his social security number, and deliver the form to the payer, not the IRS. The W-9 is also used to state whether or not the payer is exempt from backup withholding, which typically occurs with payments related to interest, dividends, broker transactions, royalties and others.

The 1099 Form

A 1099 is a form that states the exact dollar amount that a company or organization paid to independent contractor or temporary employee. These are prepared by the payer and sent to the IRS as well as the contracted worker no later than January 31 after the tax year being filed. Workers and their employers only have to report amounts of $600 or more in wages for the tax year. In the case that money is withheld for tax purposes, it is reported on the 1099 as well. The 1099 form is sent to the IRS by the independent contractor as part of a tax return.

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Types of 1099s

Taxpayers use the 1099-MISC (miscellaneous) form to report payments for services provided, royalties and winnings, income from the sale of fish caught by fishing boat crew members and other sources, but the IRS provides a total of 17 1099 forms for a variety of income situations. Those who acquire or abandon property file a 1099-A while people who earn money from securities, commodities and barter exchange transactions use 1099-B. The IRS also provides a specific form for income from interest, the 1099-INT, and retired Americans that receive distributions from their IRAs file with the 1099-R. There is even a 1099-G form for people that receive unemployment compensation, tax refunds and taxable grants.

Connection between W-9 and 1099

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A 1099 cannot be filed for an independent contractor without a valid taxpayer identification number. Therefore a W-9 must be completed; typically at the time a contractor is hired and before any payments are made. Both forms are only valid for United States citizens and resident aliens, partnerships, corporations, companies and associations created or run in the U.S.

How Do I Get Form 1099-INT?

The Internal Revenue Service requires banks, credit unions and other interest-paying companies to send an IRS Form 1099-INT to taxpayers if they earned more than $10 in interest payments during the tax year. Taxpayers who own U.S. Savings Bonds and Treasury bills will also receive the form from the federal government if they earned more than $10 of interest during the year. If you misplace your 1099-INT form or did not receive a copy, you can contact your bank or the IRS to obtain a replacement copy, or to report non-receipt

Contact your bank or payer if you never received a form or misplaced your 1099-INT. Payers must mail you their forms by January 31. The IRS also requires payers to file their forms with the IRS by the end of February, if they file paper copies. Otherwise, they have until the end of March to file their forms with the IRS.

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Ask your bank to mail you a replacement copy or original copy of the form.

Review your bank statements to obtain your interest earnings. Your bank may provide you with an annual summary of interest payments at the end of the year. Since the IRS does not require you to attach your 1099-INT forms to your tax returns, the form only serves an informational purpose. As such, you may be able to get your interest information from your bank statements.

Contact the IRS if you do not receive your form by February 15. You can call the agency's toll-free hotline at 800-829-1040 and report your missing form. The IRS will attempt to collect it on your behalf by contacting the payer directly.

Download IRS Form 4506-T, Request for Transcript of Tax Return.

Complete IRS Form 4506-T by providing your name, Social Security number, address and joint return information, if you filed a joint return with your spouse.

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Enter "Form 1040" on line 6. Since the IRS does not keep copies of 1099-INT forms, the only way you can receive a replacement copy is if you filed it with your tax returns as an attachment. Otherwise, you must contact the payer directly.

Sign your form.

Send you form to the nearest IRS service center listed on Page 2 of the instructions

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How to Complete Form 1099 for Alimony

If a divorce court ordered you to pay alimony to your ex-spouse, the Internal Revenue Service allows you to claim the alimony as a tax deduction. However, your former spouse may not realize that she must claim the alimony as income when she files her taxes. To ensure that your ex claims your alimony payments, you can request a Form 1099 from the IRS, complete the form and send it to your her. Form 1099 notifies her that you have claimed your alimony payments as a deduction and that she must report the income to the IRS.

Calculate the amount you can deduct and that your former spouse must claim as income by adding up all of the alimony payments you made throughout the year. Subtract any child support payments you may have included along with your alimony. Child support is not tax-deductible.

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Visit the IRS website to download and print a Form 1099 (see References).

Enter your name, street address, city, state, ZIP code and telephone number under the “Payer” section.

Enter your Social Security number in the box labeled “Payer’s Federal Identification Number” and your ex-spouse’s Social Security number in the box labeled “Recipient’s Federal Identification Number.”

Enter your ex-spouse's name under “Recipient’s Name.“ The boxes below request basic information about the recipient, such as his street address, city, state and ZIP code. Fill these boxes in with the corresponding information.

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Enter the full amount of alimony you paid for the year in box 3, “Other income.” Leave the remainder of the boxes empty, as these apply to business, rather than personal, transactions.

Send a copy of the Form 1099 to the IRS and a copy to your former spouse.

How to Prepare IRS Form 8396

If you were issued a qualified Mortgage Credit Certificate (MCC) by a state or local government under a qualified mortgage credit certificate program, you may be entitled to take a credit for qualified mortgage interest paid. Certificates issued by the FHA and other federal agencies do not qualify for the credit. The certificate must be issued for your main home, and it must be located in the area of the governmental unit that issued the certificate.

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Download Form 8396 Mortgage Interest Credit from the Internal Revenue Service (IRS) website.

Complete the information on the form as it is shown on your income tax return. Put the name of the issuer of the MCC, certificate number and the issue date in the applicable sections.

Enter the interest on the certified mortgage amount in Line 1 and the certified credit rate on Line 2. The credit rate cannot be less than 10 percent or more than 50 percent and it will not be the same as the interest rate on your home mortgage.

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Refer to the Form 8396 instructions for the amount to enter on Line 3 if Line 2 rate is more than 20 percent or you refinanced your mortgage. Otherwise, multiply Line 1 by Line 2 and enter the amount on Line 3.

Reduce your home mortgage interest deduction on Schedule A or F of tax return Form 1040 by the amount on Line 3.

Add any credit carry-forwards from prior years and compute the current year mortgage interest credit which will be entered on Line 54 of your Form 1040 tax return. If part of the credit is not currently usable, show those amounts of excess mortgage interest credit as carry-forwards to the subsequent year.