As a business owner or an independent professional, you’re probably keeping track of your income yourself and not relying on 1099s to know what taxes you’ll need to pay. But errors happen, and even the largest companies make them. Because the IRS receives a copy of every 1099 sent to you and then matches that data with your tax return, you’ll want to be sure that everything is accurate. Here are 7 mistakes you won’t want to make with those 1099s.
- Neglecting to watch your mail. You may have forgotten about a project you did at the beginning of the year, and you don’t want that 1099 to end up in your junk mail stack.
- Forgetting to submit changes of address to clients. Even if a client mailed a 1099 to your old address, you’re still responsible for it.
- Failing to correct errors. Most companies will send you a 1099 and give you a little time to let them know if anything is amiss before filing the IRS copy at the end of February. Don’t sit on your 1099s without looking over them to verify that everything is correct.
- Losing them. They’re arriving at different times, and chances are they’re not at the top of your priority list. You may put some here, some there, and some in your “to be opened” stack. Designate a specific place where you’ll put incoming 1099s, and be sure to make copies for your tax preparer.
- Don’t get too far ahead. Despite the fact that companies are supposed to mail you your 1099s before the end of January, some won’t. If you know you’re missing one, it’s better to wait to file your return so you can verify that the information is accurate.
- Requesting a 1099 that you haven’t received. If you’re missing a 1099, don’t ask for it to be sent, since the company may be disorganized. If you receive the original plus the one you requested, now you’ve got a problem. The IRS will also be receiving two and you’ll have to explain why you’re not paying taxes on the double amount. Reporting more income than you have 1099s for isn’t an issue. But reporting less will trigger an IRS inquiry.
- Attaching 1099s to tax documents. 1099s aren’t supposed to be attached, and you’ll just be giving yourself headaches if you do attach them. You’ll need to keep them for your records in case of an audit.
Pay attention, keep good records, and make sure you’ve got all your 1099s in hand before filing—it will save you time and trouble down the road.