In the first part of this post, we noted the function of the W-2 form for reporting income from wages. With tax filing season now underway, now is the time to look for this form from your employer, if you have employee status.
If you do not have employee status, however, the form you will be looking for is a 1099, not a W-2. Indeed, you may be looking for multiple 1099s, from multiple jobs or from other sources of income.
In this part of the post, let's discuss 1099s, which for many taxpayers have become the most critical form for tax compliance.
1099s have become so important for a couple of reasons. One is that there are so many types of income they can apply to. Another reason is that there are now so many people working as independent contractors rather than traditional employees.
The most widely known 1099 is perhaps form 1099-MISC, for miscellaneous income. But there are also 1099s for interest (1099-INT), dividends (1099-DIV) and other specific types of income.
There is also a relatively new form called 1099-K that is required for third-party payment networks. That form is used in various ways by companies such as Uber in the sharing economy. We touched on that issue in our August 16 post.
Just as with W-2s, it is possible that 1099s may not reach you or contain incorrect information. And again as with W-2s, it may be necessary to ask for a replacement form from the issuer or even to seek assistance from the IRS.
With 1099s, however, there is an additional challenge: the fact that different types of 1099s may arrive at different times of the year.
1099s are generally supposed to be in the mail to taxpayers by January 31. But sometimes the forms come much earlier. And issuers of 1099s have until the end of February to actually send copies of the forms to the IRS.
If you believe that a 1099 shows more income than you actually received, this one-month delay until the end of February offers an opportunity to get an erroneous 1099 corrected. This is important because it can invite a tax audit if the income you report on your return doesn't match up with information the IRS received through an inaccurate 1099.