Massachusetts taxpayers may be interested in an article discussing some common mistakes people often make with the IRS Form 1099 that reports miscellaneous income. Being more careful up front may help to avoid an expensive audit later.
As tax season approaches, 1099 forms are beginning to be sent out. These income forms are sent not only to the employee, but also to the IRS. Because of this, some mistakes should be avoided in order to not incur future penalties. The first big mistake is to miss the 1099 entirely. Careful attention should be paid to the mail during this time that these vital tax forms are sent out. A related issue is failing to notify the sender of a new address. Even if the employee doesn’t receive the 1099, the government will.
Filing taxes before receiving all of the necessary 1099s is another common mistake, as is misplacing the forms after their receipt. If an expected 1099 is not received, one adviser recommends not asking about it, but instead to simply report the income that would have appeared on the form. Inquiring further, he says, could result in two being sent, and the income being reported to the IRS twice. The biggest mistake is a failure to report the income reflected on the form. Problems can often be avoided by being up front with the IRS in the first place.
Federal income tax laws and regulations can often be complicated, but failure to follow them can lead to penalties and fines, and in some cases to wage garnishments and bank levies. A tax attorney may be able to help a client with the collection of all appropriate forms and records necessary for the preparation of an accurate return.
Source: Forbes, “7 Crippling Mistakes With Form 1099 That Cost Big“, Robert W. Wood, January 25, 2014