Tax Basics:

Tax Forms That Arrive in the Mail

Depending upon their individual situation, they may or may not receive a lot of tax related forms in the mail this year. People who work for more than one employer can expect to receive a W-2 from each business by the end of January. If they have investments, own their own business or receive income from other sources, they can expect to find more and more forms clogging up their mailbox between January and February. Getting themselves acquainted with what forms they can expect to receive as well as what these forms are reporting will go a long way toward helping them when they finally sit down to tackle their tax return.

If your client has investments, or even a simple bank account, they can expect to receive a Form 1099 from each bank, company and fund they invested with this year. So not only may they receive a lot of Form 1099s if they have a tendency to invest their money, but there are a variety of 1099s they may receive, each indicative of its nature.

  • Form 1099-INT – This form is usually received from banks and reports the amount of interest they earned during the tax year. If they do not receive a Form 1099-INT from a company they received interest from during this tax year, they are still required to report it on their Form 1040.
  • Form 1099-DIV – These forms are usually received from mutual funds, brokers and companies with whom they have invested and report the dividends they received during the year. This income is reported on a Form 1040.
  • Form 1099-B – This form reports stock and security sales. It lists all the investments they sold during the year as well as the amounts they received from the transactions. Stock and security sales are reported on Schedule D. You list the cost of their security as the total amount they paid, including commissions and fees.
  • Form 1099-G – State refund taxes, unemployment compensation and other payments made to them by the government are reported on this form. They must complete the State and Lo9cal Income Tax Refund Worksheet included in the Form 1040 instructions to det5eremine if their tax refund has to be included on their return.
  • Form 1099-MISC – This form reports such incomes as royalties, rental and self-employment income. The kind of income reported will determine which schedule they report this income on. For example, royalties and rental income should be reported on Schedule E, while self-employment income should be reported on Schedule C.
  • Form 1099-R – This form reports distributions from IRAs and other retirement plans. Be careful here, determining the right amount of pension income to report can be tricky.
  • Form 1099-SSA – This form reports any social security income your client may have received for the year. To determine if, and if so how much, they must report on their tax return, fill out the Social Security Benefits Worksheet in the instructions for Form 1040.

Still, there are yet more types of income that they may or may not receive forms for, but are still required reporting in their tax return.

  • Alimony Income – report this on Form 1040.
  • Income From their Own Business – They must report this income even if they did not receive a Form 1099-MISC for it. Their business income and expenses are reported on Schedule C (Schedule F if their business is farming.)
  • Rental Property Income – They should receive a Form 1098, Mortgage Interest Statement, if they make mortgage payments on rental property. This income and related expenses should be reported on Schedule E.
  • Income From Partnerships and Estates or Trusts they are the Beneficiary For – they should receive a Schedule K-1 reporting this income from each partnership, estate or trust your client is a part of. Report this income on Schedule E.