What To Do With The 1099-MISC Form You Just Received?

FROM FORBES.COM -

Across the US, millions of people are getting 1099-MISC forms. Of course, it’s a way for the IRS to make sure it gets paid the taxes owed. This is done by matching the 1099-MISC form you received and the one that your client sent to the agency. In other words, this is something you can’t ignore – that is, unless you want to get a nasty gram from the IRS.

If you are considered an independent contractor, then you will get a 1099-MISC form from a company you provided services for – so long as the payments were at least $600 for the prior year. Now, if you did not get anything in the mail, then you should contact the client. Yes, sometimes the form can get lost or sent to the wrong address. Or, the client may have just been late or did not even realize a form needed to be sent out! To help along with the process, you should also send over a completed W-9 form.

And what if the client still does not send anything? Well, you still need to report the income and also notify the IRS. Something else that is often overlooked:  you need to report any gross income earned even if its under the $600 threshold.

Once you get the 1099-MISC form, you can then begin the process of putting together your tax return. For many independent contractors, this means filling out a Schedule C, which tallies up the income earned and any deductible expenses. There will also be a need to file a Schedule SE, which accounts for Social Security and Medicare payments.

The good news is that it is a fairly easy process, especially if you use tax prep software like Intuit’s (INTU) TurboTax or Blucora’s (BCOR) TaxACT. Each provides a wizard to help enter the information.

But of course, you also want to make sure you maximize your tax benefits – which can be quite extensive for independent contractors. For more on this, I have a recent post on the topic.