Steps to take before you prepare your 1099 taxes

Steps to take before you prepare your 1099 taxes

Before preparing to pay the 1099 taxes, the taxpayers have to gather all the annual tax documents that they have received to record their taxable income and other expenses. For taxpayers who have itemized their deductions, it is important to collect the receipts and organize all of them by category.  It could also be useful to take the taxes of the previous year for reference. The taxpayers could also download these tax forms from the IRS Government website. Other steps to take to prepare for the 1099 taxes are as follows.

Gather all required information:

This is perhaps one of the first steps to take while preparing for the 1099 taxes. The personal information that you would require is the social security number. You would require to note the addresses of those to whom 1099 Forms have to be sent, the amount that has been originally for it, and the total amount received from the sale. By the end of January, you would receive all the tax documents that you would require from the employers, from the banks, brokerage firms, and from others with whom you do business. The common forms that you would receive are, 

  • Form W2, if you have a job
  • Form 1099- DIV if you receive dividend income
  • Form 1099- INT if you expect interest payments
  • Form 1099- MISC if you receive non-employee compensation for your independent contract work.
  • Form 1099-B that reports profits and losses in security transactions
  • Form W-2G if you have received gambling winning amounts
  • Form 1098 that reports mortgage interests. 

Plan for refunds:

If you are expecting a refund you can choose to apply all or some of the refund in next year’s taxes. The government can send a deposit or a check that refunds the money directly into the savings account. You can choose to contribute some or all of your refunds to some types of accounts or choose to buy US savings bonds. It is also at your discretion to split the refund among the direct refund deposit choices by completing Form 8888. 

Estimate the tax payments:

One thing to notice about 1099 Forms is that, the client generally do not withhold the income tax from the payments, as they do for other employees. But you have an obligation to prepare up to four estimated tax payments with the IRS during the tax year. The frequency of the estimated tax payments depends on the income you earn, the tax withheld from other employment income, and the method you use to calculate the estimated taxes. You can use Form 1040-ES to calculate your estimated tax obligations. 

Choosing the best tax preparer:

Filing 1099 Forms could be a hurdle and the best way to ease out the process is to take help from an online tax preparer like Tax2efile. They help with a hassle-free tax filing process and you can also choose to schedule the tax filing so that you don’t have to end up with late filing penalties. They will help with the electronic tax filing process and their representatives will offer round-the-clock assistance for the entire filing process.