The IRS has multiple forms that can be confusing for taxpayers when filing their returns. Let’s take a look at the form 1099 and decipher its importance.
The agony that the numerous forms by the IRS cause are unthinkable while filing our tax returns. If you have a proper understanding of what each form entails. One of the most important forms that are issued by the IRS for tax purposes is the Form 1099. The 1099 IRS forms cover various kinds of income other than the usual salaries, wages, and guidelines. When filing form 1040 for income tax purposes the Form 1099 need not be submitted, and it requires a separate submission. There are various types of Form 1099 that are issued. The most common types are 1099-INT, 1099-R and SSA-1099. Apart from these three forms, the Form 1099-MISC is used by businesses who cannot categorize any incomes that fall under the three aforementioned forms.
Form 1099-INT – Interest on Income
This form is used by banking institutions and brokers (for customers who have mutual fund accounts only) mostly. It is also used by people who accumulate for $10 of interest in any single fiscal year. Most banks issue this form 1099 online and can be downloaded from their websites for free. However, you should know that all withdrawal penalties for things like cashing out of a CD early appear on the 1099-INT form. These penalties are deductible on line 30 against the 1040 form and they need not be itemized on the 1099-INT.
1099-R – Distribution from retirement accounts
This form reflects any kind of money that may have been moved around by taxpayers. This is one of the most complex among the 1099 IRS forms and it is triggered through any kind of regular activities that involve moving money around from traditional IRAs to any kind of Roth IRAs. It will also come up if you roll over a 401k from your old job or take any form of early distributions for buying a house. It can also be triggered if you withdraw after retirement. Along with this, you might have to pay the form SSA-1099, which is triggered if you start taking social security benefits.
Most people are confused when they see various tax forms being issued against their names despite thinking they do not have any taxes due. You can refer to box 1 and find out the total amount of sum you have disbursed or moved and the second box bifurcates the taxable amount and the non-taxable amounts in the a and b boxes respectively. One of the best ways to get rid of all the stress and confusion is by opting for online services that help you calculate the exact amount of tax you need to pay and let you file your form 1099 online for a small fee making everything convenient and simple.