Editor's Note: This article is part of our 2014 Tax Tips series. Robert Flach is an expert with more than 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.
NEW YORK (MainStreet) In the next few weeks, you will be receiving the information returns needed to prepare your 2013 Form 1040. Employers, banks, brokers, mortgage companies, mutual funds, etc. must provide taxpayers with W-2s, 1099s and 1098s by January 31, 2014.
The deadline is extended to Feb. 18th for:
- 1099-B (Proceeds from Broker and Barter Exchange Transactions)
- 1099-S (Proceeds from Real Estate Transactions), and
- 1099-MISC (Miscellaneous Income) if there is an entry in Box 8 or 14.
Here is a listing of the common types of information returns you could receive
- W-2: Wage and Tax Statement reports taxable federal, state, and local wages and income tax withholding, Social Security and Medicare tax withholding, and other related information.
- W-2G: Gambling Winnings - reports direct wager winnings from a single "game" of more than $600. This is not necessarily the amount to claim as gross gambling winnings on your Form 1040.
- 1098: Mortgage Interest Statement reports mortgage and home equity interest, points on the purchase of a principal residence, and mortgage insurance premiums paid. The amounts you can deduct may be limited.
- 1098-C: Contributions of Motor Vehicles, Boats and Airplanes provides the information necessary to claim a deduction for donating a car, boat, or plane to charity.
- 1098-E: Student Loan Interest Statement reports the amount of student loan interest paid. The amount you can deduct is limited.
- 1098-T: Tuition Statement reports tuition and fees billed and/or paid, scholarships and grants received, and other information needed to claim a deduction or credit for qualified tuition and fees. This statement alone is usually not enough to properly claim the deduction or credit.
- 1099-B: Proceeds from Broker and Barter Exchange Transactions reports the proceeds from the sale of stocks, bonds, mutual funds, and other securities. It also reports the cost basis and any "wash-sale" adjustments for more recently purchased investments.
- 1099-C: Cancellation of Debt reports the amount of mortgage, home equity, credit card, student loan, and other debt that has been forgiven or cancelled. This may need to be included in taxable income.
- 1099-DIV: Dividends and Distributions reports ordinary, qualified, and tax-exempt dividends, capital gain distributions, and non-dividend distributions received and foreign tax paid.
- 1099-G: Government Payments reports taxable unemployment compensation, state tax refunds, and other payments made by a federal, state, or local government. Many states no longer mail out Form 1099-G for state tax refunds you must go online to the state tax department website to download the form. State tax refunds are not necessarily taxable.
- 1099-INT: Interest Income reports the amount of taxable and tax-exempt interest received and foreign tax paid
- 1099-K: Merchant Card and Third Party Network Payments reports the amount of payments received from a credit card (if your business accepts credit cards for payment) or other third-party (i.e. PayPal) processing agent.
- 1099-MISC: Miscellaneous Income reports "non-employee compensation" (payments to independent contractors and subcontractors for goods and services) in excess of $600, rents, royalties, prizes and awards, broker payments "in lieu of" interest and dividends, and a variety of other payments made in the course of a trade or business. Generally the receipt of "non-employee compensation" will require filing a Schedule C or C-EZ and possibly Schedule SE.
- 1099-OID: Original Issue Discount reports accrued interest on zero-coupon bonds, Treasury bills, and other securities issued at a discount from par that must be currently reported. This income is reported on Schedule B along with interest income from Form 1099-INT.
- 1099-Q: Payment from Qualified Education Programs reports distributions received from a Section 529 qualified tuition program or Coverdell Education Savings Account. Distributions in excess of adjusted qualified education expenses may be taxable.
- 1099-R: Distributions from Pensions, Annuities, Retirement Plans, IRAs, or Insurance Contracts reports gross distributions from the types of accounts listed in the title. The entire amount of the distribution is not necessarily taxable. The Form 1099-R may indicate the taxable portion of the distribution. If there is no entry in Box 2a (Taxable Amount) is does not necessarily mean that the distributions is not taxable.
- 1099-S: Proceeds from Real Estate Transactions - reports the gross proceeds from the sale of real estate, including your personal residence. If the sale price of a personal residence is less than $250,000 or $500,000 a Form 1099-S may not be issued.
- SSA-1099: Social Security Benefit Statement reports Social Security benefits received and Medicare insurance premiums deducted from these benefits.
- RRB-1099: Payments by the Railroad Retirement Board reports "Social Security Equivalent" Railroad Retirement benefits received and Medicare insurance premiums deducted from these benefits. These benefits are taxed in the same way as Social Security benefits.
- RRB-1099R: Pension and Annuity Income by the Railroad Retirement Board reports "Non-Social Security Equivalent" Railroad Retirement benefits received. These benefits are taxed like any other private or public pension. The Form RRB-1099R should indicate total employee contributions to Railroad Retirement, which may be needed to calculate the taxable portion of the distribution.
- Schedule K-1 (Form 1041, Form 1065, or Form 1120-S) - reports pass through income, deductions, credits, and other information for a partner of a partnership, shareholder of a sub-Chapter S corporation, and beneficiary of an estate or trust. March 17th is the due date for furnishing shareholders, and partners of "electing large partnerships", with a calendar year Schedule K-1, and April 15, 2014 is the deadline for furnishing partners and beneficiaries with a calendar year K-1, unless the underlying return has been extended. For a fiscal-year entity, the information on the K-1 is reported in the tax year in which the fiscal year ends.
As you receive these returns, check the amounts reported against your own records. Verify that the Social Security number indicated on all the forms is correct. If you discover an error, or something you do not understand, contact the employer or financial institution immediately for an explanation or a corrected return.
Some information returns may come folded in with or attached to other documents, so check the contents of each envelope carefully. For example, your Form 1098 may arrive in the same envelope as your January monthly mortgage statement. Some year-end dividend checks have a Form 1099-DIV attached. Don't separate the check and throw out the 1099-DIV by mistake thinking it is merely a stub. Check 1099-DIVs you receive to see if there is a dividend check attached. I can't tell you how many times I have found checks attached to 1099s given to me by clients.
Just because you did not receive a Form 1099 for income does not mean that one was not sent to the IRS. You must report all taxable income, whether or not you have received a Form 1099. Form 1099-DIV and 1099-INT does not have to be issued if the amount is under $10.00, and Form 1099-MISC may not need to be issued if the amount is under $600.00, but all taxable dividends, interest, and "miscellaneous" income must be reported regardless of the amount received.
--Written by Robert D. Flach for MainStreet