With all the holidays that take place between mid-October and mid-January ─ along with the requisite parties, family gatherings, and traditions associated with them, tax preparation may not be the most important thing on your mind. Nonetheless, this is a great time to get a head start on the upcoming tax season. Knowing which IRS 1099 forms you’ll need — as well as when to expect them and what to do with them — can help make that happen.
The 1099 Forms
Form 1099 provides information on the taxable income you receive. Because income can come from different sources, the IRS groups it into different categories. The various categories have specific 1099 forms associated with them.
For the 2018 tax year, there are 20 different versions of Form 1099. Depending on your circumstances, you could receive five to 10 various 1099s in any given year.
Investment Income 1099 Forms
Investment income, like income in general, can come from different sources. The following are some of the primary investment-related income categories and the associated 1099 forms that you may receive.
- Interest income paid on bonds and other types of fixed-income securities, such as fixed annuities, is taxable as ordinary income unless paid inside an IRA, qualified plan or annuity contract. Municipal bond interest is tax-free at the Federal level (state and local taxes may apply), while interest from treasury securities is exempt from taxation at the state and local levels. You’ll receive Form 1099-INT if you own bonds, CDs or mutual funds that invest in fixed-income securities or cash or have an interest-bearing bank or brokerage account.
- Dividends represent a portion of a company’s current profits that it passes on to shareholders. The total dividends you receive from common or preferred stock or mutual funds that invest in them are reported on Form 1099-DIV.
- Capital gains are the profits you receive when publicly traded securities are sold for more than their purchase price. Form 1099-B outlines the amount of your capital gain or loss for the tax year. Many brokerage firms issue additional statements that break down the loss or gain for each trade and then quantify them into net long- and/or short-term gains and losses for the year.
- Miscellaneous Income can include income from a variety of sources. Form 1099-MISCtypically covers them — including income and reimbursed expenses you receive as an independent contractor. Form 1099-MISC also captures a wide range of payments you may receive, such as rent, royalties, prizes and awards, and substitute payments in lieu of dividends.
What the IRS classifies as “income” might not necessarily seem like income to you. But if the IRS considers it taxable, you’ll receive a Form 1099 that reports it. For example, if you purchased a bond for less than its face value or principal amount, you’ll receive Form 1099-OID. OID stands for “original issue discount.” OID is the difference between the amount you would receive when the bond matures and the issue price. Generally, you must claim part of the OID as interest income each year that you hold the bond whether you receive the payment or not.
If a lender agrees to forgive a portion of what you owe them, the IRS considers that as income. Form 1099-C is the form that the lender reports the amount forgiven — and upon which you must pay taxes. There’s also Form 1099-Q, which reports distributions, including transfers to another financial institution, from education savings accounts (ESAs) and 529 accounts.
- Retirement and annuity distributions aren’t technically a form of investment income. They’re listed here because IRA and retirement plan owners can only access the gains from their investments in these accounts by taking distributions. Normal distributions are taxed as ordinary income. Form 1099-R is issued to everyone who receives distributions from IRAs, qualified retirement plans or annuity contracts that are not housed inside a tax-deferred account or plan.
The Consolidated Form
There’s one other form related to income you may receive if you’re an investor. The IRS allows investment firms to issue consolidated reporting statements, which include all applicable 1099 forms. They may include 1099-INT, 1099-DIV, 1099-B, 1099-OID and/or 1099-MISC.
Form 1099 Delivery Dates
With the exception for Form 1099-B and the Consolidated Tax Statement, you should receive your 1099 forms by January 31, 2019. For Form 1099-B and Consolidated 1099 Tax Statements, the IRS requires brokerage firms to mail or electronically deliver them by February 15.
It’s important to note that for some security types, final tax information from the bank, institution, or other type of issuer may be received after the standard deadline. As a result, your final consolidated statement may not arrive by the February date. In these cases, your final 1099 Consolidated Tax Statement will be mailed between March 1- 15, 2019.
Your To-Do List
Once you’re clear on which 1099 forms you’ll be receiving, as well as the other forms you’ll need, get organized.
- Make a list of the 1099 forms you’ll need and cross them off once you’ve received them. Upon receipt, verify that the information matches your own records.
- Put them in a place where you can easily access them when you’re ready to file your taxes.
- If you’re expecting a 1099 and don’t receive it by February 15, contact the IRS at 1-800-829-1040.
- Check with your investment firm regarding the dates for sending out Consolidated Tax Statements.
- Thoroughly review 2018 General Instructions for Certain Information Returns, which is available at www.irs.gov. The table titled “Where To Report Certain Items From 2018 Forms W-2, 1097, 1098, and 1099” shows that for returns involving income reported on most versions of Form 1099, the use of Form 1040 is required.
Don’t feel you have to go it alone. Consult with a tax advisor or other financial consultant for information specific to your tax circumstances. If you’re in the market for a financial advisor, it may be worthwhile to find one that also handles taxes to help ease next year’s tax preparation. Use the LPL Find an Advisor tool to find an advisor in your area.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.