It’s tough enough for freelancers to calculate and pay the taxes they owe on income from which no funds have been withheld, but even more difficult if their bosses screw up their tax info. If the company you work for incorrectly reports your income on a 1099 form, you’ll be on the hook for paying taxes on that amount unless you can set things straight.
What many taxpayers don’t know when they step into H&R Block, Jackson Hewitt or go to some tax-preparation site is that there are several thousand IRS-approved volunteers out there willing to do the job for free if you qualify.
Some of your 1099s may be delayed this year because recent changes in the tax law require them to be corrected. They’re supposed to be mailed out by Jan 31 but this year they may not even show up until after the April 18th filing deadline. So what do you do?
Although it’s tempting to duck and cover to protect yourself from the onslaught of tax forms filling up your mailbox these days, it’s a good idea to examine the numbers on your W2s and 1099s to ensure they’re accurate. If an employer or bank screws up and reports it gave you more money than it really did and you don’t notice, you’re on the hook for the extra taxes.
If you tend to move a lot of merchandise on eBay or Craigslist, you should know that the IRS wants a share of those earnings. If in 2011 you sell more than $20,000 worth of goods and have more than 200 transactions, then come early 2012 you’ll receive a shiny new flavor of 1099 form called a 1099-K, and you’ll have to pay up. If you’re an infrequent seller, where your eBay or Craigslist transactions more closely resemble a garage sale than a virtual storefront (and especially if you sell items at a loss), you probably don’t have to worry.
The deadline for mailing W-2s and 1099s was Jan. 31, so if you don’t have yours yet…they’re probably lost in the mail. Don’t panic, Blueprint for Financial Prosperity has some tips to help track them down.