The A-Z of How to Fill Out a 1099 Form

The A-Z of How to Fill Out a 1099 Form

by | Feb 16, 2022 | Form RRB 1099

Small businesses have enjoyed consistent growth in the US in the last few years. There were 32.5 million such enterprises in 2021, up 2.5%  over 2020. And a 9.8% increase in the previous four years.

These small enterprises are job providers for freelancers and independent contractors. According to statistics, approximately 70% of such businesses hire freelancers.

The IRS (Internal Revenue Services) requires these entrepreneurs and freelancers to fill out the 1099 form. And refusing to comply with this has repercussions. So, if you are an Indian freelancer or a small business owner in the US, we will tell you how to fill out a 1099 form.

What is a 1099 Form?

What-is-a-1099-form

A 1099 form is used to report a freelancer or independent contractor’s non-employment income of $600 or more. It includes revenue from stock dividends, interest on deposits, property sales, cash prizes, royalties, and other sources. 

The IRS receives this form straight from the payer. Therefore, the taxpayer doesn’t need to file it in their income tax return (ITR). They are, nevertheless, required to inform the IRS about these transactions.

Who is included under the 1099 category?

With nearly 59 million freelancers, the USA is regarded as the largest freelancer market in the world. And out of this figure, 36 million do it on a full-time basis. 

Every year freelancers contribute $1trillion to the US economy. As a result, their earnings must be reported on the 1099 form. In addition, businesses that hire their services must also file the 1099 form with the IRS.

They do not need to fill out this form if they hired freelancers or contract workers through a third party like Fiverr, Upwork, or Freelancer.com.

Types of 1099 form

A non-salary income has varied forms – like consulting fees, dividends, interest, retirement payouts, tax refunds, and so on. And the 1099 form has a different category for each of these. We will show you how to fill out the 1099 form for payments made or received:

1) 1099 NEC – A company that paid $600 or more to an independent contractor or freelancer for work in the last fiscal year must fill out this form.  Similarly, if they paid $600 or more to an attorney, they are subject to 1099 NEC.

2) 1099-DIV – If a person receives dividend income from their stocks, they will receive a 1099 DIV. The company will send them this form.

3) 1099 – INT – Individuals who earned $10 or more in interest in the preceding year will receive this form from banks and brokerage firms.

4) 1099 G – People who receive federal, state, or local government tax returns or unemployment benefits also receive 1099-G.

Recommended: All about Unemployment Income Reports – AOTAX.COM

5) 1099-R – This form is also issued to those receiving money through a retirement or pension plan or individual retirement account (IRA). In addition, certain annuities and insurance contracts also fall in this category, though they may or may not be taxable.

6) 1099-S – This form is used to report the sale of land, which might be residential, commercial, or industrial.

7) 1099 MISC – This category includes money received as cash, reward, award, royalties that were not earned through employment.

How to Fill Out a 1099 Form?

How-to-fill-out-a-1099-form

The 1099 form has two copies – A & B. When a business owner hires a freelancer, they must fill in copy A and send it to the IRS. And send copy B to the freelancer. Both the copies should be sent to the IRS before January 31.

Employers can submit physically or electronically. If they do it physically, they must also submit the 1096 form. They have to do it on the IRS Filing a Return Electronically (FIRE) system for online submission.

Moreover, unless the freelancer is a non-resident or resident alien, the form should include the following information – legal name, residence, the total amount paid in the previous year, and social security number.

The contractor should also consent the business owner to receive 1099 by email or paper copy. 

Deadline

The IRS requires the taxpayers to report their 1099 income by January 31 of each year. The businesses must file by the end of February. Whether a taxpayer has received their 1099 or not, they must report such income to the IRS.

Notify about your changed address

If you are a freelancer and have changed your address, ensure that you receive everything the IRS sends. Hence, inform your payers (employer) about the address change.

Correction of errors

If freelancers receive 1099 from their payers with any errors or discrepancies, they should contact the latter to correct it before January 31. If the payer fails to rectify the errors, the freelancer should inform the IRS about it in the tax return form.

Penalties

If a freelancer/independent contractor fails to file/report their 1099 on time, they will be subject to the following penalties:

1)    A delay of 30 days after the due date costs $50.

2)    A delay of 30 days or more till August 1 costs $100.

3)    If submitted on or after August 1, the fees will be $260.

4)    If you fail to file it, you must pay a minimum of $530.

Being a law-abiding US citizen and the taxpayer is good for you. And if you follow the above instructions, you can easily fill out or report your 1099 forms. It will also keep you out of trouble with the IRS.

Recommended: Expert Tips on How to Save BIG on Income Tax Filing – AOTAX.COM

If you have trouble filling your taxes, contact AOTAX to help you do so. With us, filing your tax returns will be a breeze, thanks to their staff of expert tax planners and skilled advisors. For any more information, visit us on Home – AOTAX. 

What Is IRS Form 1099-INT: Interest Income?

What Is IRS Form 1099-INT: Interest Income?

by | May 9, 2019 | Blog, Tax Extension, Tax Planning, Tax Preparation

What Is IRS Form 1099-INT: Interest Income?

Tax filing season can be stressful, to say the least. With several documents, investments, proofs and bills to take care of, various Forms can make things a bit more overwhelming. Thus, the golden rule of starting early always pays off. When you start early, you have additional time at hands to review your filing and more importantly, fill the Forms as accurately as possible without much stress. IRS Form 1099-INT is one such form that the expects during your tax filing. What is it about? And when and why you should file it, let’s find out.

What is it?

Form 1099-INT by the IRS must be used by taxpayers to declare their earned interest. All investors receive the form by their payers of interest at the end of the year with a breakdown of the interests earned and any other related expenses. $10 is the minimum value, above which a payer must provide the Form to its investors. At the same time, you need not attach all the Forms 1099-INT with your tax returns.

Details of 1099-INT

It is essential that you understand the details of the Form, which will, in turn, help you fill the appropriate information in your tax return.

  • Box 1

This box contains any income that you receive which is taxable, such as interest earned on savings accounts.

  • Box 2

This box represents any penalties that you have been charged with, due to premature withdrawals.

  • Box 3

The contents of this box represent interests earned on bills, bonds or Treasury notes.You need to be a bit careful since some of them are tax-exempt.

  • Box 4

This box reports any taxes that were withheld by your payer.

  • Box 8

This box contains information about your investments that earn interests with state and local governments. A municipal bond would be a good example of it.

Information Contained in Report

Form 1099-INT contains the following information.

  • The name and address of any payer.
  • The name and address of the recipient.
  • Any foreign taxes paid.
  • Any form of state taxes withheld.
  • Any form of federal taxes withheld.
  • Identification numbers of the payers as well as recipients.
  • The amount of interest paid (only if it exceeds $10).
  • Total bond premiums.
  • Total bond premiums on the tax-exempt ones.
  • Total amount of interest that is exempt from taxes.
  • Total amount of interest earned on Treasury bonds, US savings bonds etc.

Reporting Form 1099-INT

The Box 1 income, as mentioned above, must be reported in the taxable income row of your tax return. The interests earned is taxed in the same way as other sources of income. Box 2 mentions about the penalties, for which you can opt for deductions when it comes to the adjusted gross income. One must not forget to report the taxes withheld mentioned in Box 4. You should include the amount in your tax return under Payments.

All the interest that you earn on deposits made to your bank accounts, amounts that were withheld from your federal taxes or foreign taxes, dividends paid by insurance companies, indebtedness etc. must be reported in Form 1099-INT.

Apart from the above, interests earned in the form of real estate mortgage investment conduit (REMIC), financial asset securitization investment trust (FASIT) or collateralized debt obligation (CDO) must also be reported in the Form 1099-INT.

Individuals earning more than $1,500 in interests must declare all their payers in Part 1 of Schedule B of Form 1040. Also, you can only include income that you have received and not the ones that you are owed.