You may receive IRS Form 1099-MISC, a tax form for the service that you provided to someone as an independent contractor. If you have received payments of $400 or more annually, you will have to file taxes in a little different way than the taxpayer who has a regular employment and who reports income on Form W-2. Some accounting business services offer 1099 preparation service inclusive of processing it. Receiving the form 1099 can be quite unpleasant as it is likely to report the income that has not been taxed for the reason of withholding it.
Unless you have saved some amount throughout the year and kept it aside towards payment of taxes or similar, it can become a liability. Form 1099-MISC could complicate your tax return filing. Nearly 17 types of form 1099 are available which makes tracking of various types of taxable income difficult.
If you have never filed a tax return for any of the 17 variations of form 1099, it is advised you refer “1040 instructions 2017” and understand it thoroughly before preparing your returns.
You will find a table titled ‘Where to Report Certain Items from 2017 Forms W-2, 1097, 1098, and 1099’. It indicates that for filing returns for the income that is reported on the various version of form 1099, using of form 1040 is necessary.
You may also need other documents like Form 4797, Form 6251, 6252, and 6781, Form 8889, 8903 and 8949. Also Schedule A, C, C-EZ, E and F. You can find the instructions for Schedule SE too.
Looking at the 17 different versions of form 1099 and the purposes they are used for the following
1099-A is applicable for Acquisition or Abandonment of Secured Property
1099-B is applicable for Proceeds from Broker and Barter Exchange Transactions
1099-C is applicable for Cancellation of Debt
1099-CAP is applicable in case of Changes made to Corporate Control and Capital Structure
1099-DIV is applicable for Dividends and Distributions
1099-G is applicable for Certain Government Payments
1099-H is applicable for Health Coverage Tax Credit (HCTC) Advance Payments
1099-INT is applicable for Interest Income
1099-K is applicable for Merchant Card and Third-Party Network Payments
1099-LTC is applicable to Long-Term Care and Accelerated Death Benefits
1099-MISC is applicable to Miscellaneous Income
1099-OID is applicable to Original Issue Discount
1099-PATR is applicable for Taxable Distributions Received from Cooperatives
1099-Q is applicable for Payments from Qualified Education Programs
1099-R is applicable for Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. and IRA Contribution Information
1099-S is applicable for Proceeds from Real Estate Transactions
1099-SA is applicable for Distributions from an HSA, Archer MSA, or Medicare + Choice MSA
Being a self-employed person, you must also pay social security and Medicare taxes. Nevertheless, as your form 1099- MISC is not subject to withholding of self-employment taxes, it is necessary for you to calculate and pay them yourself. These appear on Schedule SE, which needs to be attached along with your tax return.
Preparing and filing form 1099- MISC has to be done properly and the laid down provisions and clauses must be understood well. It can be quite complicated and can even become a liability if you have not kept aside funds to meet this requirement. 1099 reporting form has to be chosen rightly pertaining to the type of income received as explained above.