If some of your income comes from investments or self-employment, expect a Form 1099 in the mail. If you're an independent contractor, businesses or individuals who pay you more than $600 report your income on a 1099, sending copies to both you and the IRS. Companies also use the form to report paying you interest and dividend income, royalties, death benefits or canceling your debts, which translates into taxable income. If whoever sends you the 1099 withheld any federal income tax, the form records how much.
Separate your 1099s according to whether you pay tax on the money or not. Some canceled debts don't count as taxable income, even though your lender uses a 1099 to report them to you. The last thing you want to do is include that money when you're figuring out how much tax you owe.
Add up the total taxable income on all your 1099s from different clients or companies. If you have self-employment income that didn't generate a 1099 -- from a client who paid you less than $600, for instance -- add that too.
Report your self-employment income on Schedule SE if it's more than $400. Above that figure you pay self-employment tax -- Medicare and Social Security payments for independent contractors. Follow the SE instructions to calculate the tax.
Write your 1099 income onto the appropriate lines on your 1040: Dividend income, for example, goes on a different line from self-employment income. Write down any other income, such as money from your day job. Follow the steps in the instructions to complete the form and calculate your total income tax.
Total your withheld tax, including any withholding identified on your 1099s. Subtract the withholding and any estimated tax you paid during the year from the total amount of tax you owe. Whatever remains tells you the size of your check to the IRS -- or if you're lucky, the size of your refund.
- If you don't receive 1099s by the end of January, contact the issuing company and ask it to resend the form. Don't panic if the form doesn't arrive by the time you submit your taxes: You don't have to send in a 1099 with your 1040. As long as you have the same information in your own records, you can use that to compute your taxes.
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- What Is the Purpose of a 1099 Tax Form?
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- How to Pay Quarterly Taxes If You Receive a 1099
- What Can I Do if My 1099 Is Incorrect?
- What Are the Rules for Giving Out a 1099 Tax Form?
- "Which Form to Use to File Federal Taxes for Self Employment Income Under $5,000"