Check for accuracy

Now is the time you will start receiving year-end informational tax forms. We’re all fairly familiar with W-2s from our employer, but you will also probably receive a number of different 1099s. Make your tax filing experience smooth this year by staying on top of these informational tax returns. Here are some tips.

• Know the different types of 1099s. The most common 1099s that taxpayers receive are:
  • 1099 INT: for interest received
  • 1099 DIV: for dividends received
  • 1099 B: for brokerage transactions (selling stocks and mutual funds)
  • 1099 R: for annuity, retirement, and pension income
  • 1099 MISC: for miscellaneous income
  • 1099 K: for merchant card activity
• Make a list. Review last year’s list of informational tax forms and create a checklist of them. Add to that list any new forms you might expect to receive. Mark them off your list as you receive them.
• Check for accuracy. Review each of the informational tax forms for accuracy. Is the income, interest, annuity or other income correctly reported? If cost is reported on the 1099 B, is it the correct amount? Make sure your name and your tax ID (Social Security Number) are also correct.
• Take corrective action. If you have not received your information return by the mid February, contact the issuing organization. Also call and start the process to correct any errors you find. Make sure you follow up any correction request in writing.
• Conduct withholding verification. If the supplier withheld any tax on this activity ensure it is noted as well.
• Understand those 1099 Ks. This is the new kid on the 1099 block and was introduced to try to capture sales activity from places like e-bay and Amazon. If you receive one of these, please pay special attention to the information being reported to you and the IRS. These forms are complicated and track payment processing transactions. If not properly understood, you could inadvertently double book income on your business activity.

Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and Twitter.