Tax season has now arrived, and taxpayers are hurrying to get their returns completed in time. However, for those who receive Form 1099, they need to take certain precautions because making mistakes can cost them a significant amount of money. Below are three traps that many taxpayers who receive Form 1099 fall into.
Mistake 1: Forgetting to watch your mail-Taxpayers who receive Forms W-2 typically are careful to watch for this form in the mail. However, many taxpayers who receive Form 1099 are often careless by not watching out for it. These taxpayers should be sure to watch out for their Form 1099 in the mail because the form is attached to the taxpayer’s social security number and failing to report the form can lead to an audit!
Mistake 2: Forgetting to update your payer with your correct address-Whatever address the taxpayer has listed on the Form is the address that will be reported to the IRS based on the taxpayer’s social security number. Taxpayers should make sure that their payer has their correct address on file so that the taxpayer receives a copy of whatever the payer sends to the IRS. Taxpayers want to be able to access the same records that the IRS has, so taxpayers should make sure that they provide their updated contact information to their payers. In addition, taxpayers should file a Form 8822 Change of Address with the IRS to insure all records with the IRS are accurate.
Mistake 3: Failing to correct errors on the Form 1099-The deadline for payers to mail the Form 1099 to taxpayers (in most cases) is January 31st. Then, the payer generally has until the end of February to send copies of the Form to the IRS. Taxpayers should use this month delay to correct any errors that may have been made on the Form. For instance, the taxpayer’s Form reports $10,000.00 of income when the taxpayer was only paid $1,000.00. This error can cost the taxpayer a significant amount of money if not corrected.