1099 Tax Preparation Help
Confused about how to file your 1099 on your tax return?
Examples of common types of 1099 forms
Each different type of 1099 may be taxed differently. I will go through a few examples:
1099-B from brokerages: These are normally for passive investments or active trading and produce capital gains. There are strategies to reduce these capital gains or have them taxed at a lower rate. Contact us for more information about that or if you need us to file your return with 1099-B income.
1099-DIV or 1099-INT: These are typically from passive dividends or interest investments. Even if the amount is small, you must report this on your return or you may receive an IRS adjustment notice.
1099-K from Crypto: If you have received this, the IRS will allow you to file it on forms 8949 and schedule D, which will allow you to bypass self-employment tax. This will also allow you to adjust your basis when reporting the sale so you are taxed only on your gains rather than on the full sale price. We are registered as Cryptocurrency Accountants, so you can contact us for assistance.
1099-MISC or 1099-K from merchant accounts (otherwise known as credit card processors or e-commerce income): This type of income has the most flexibility in terms of deductions – taxpayers are occasionally given a choice by their employer to be paid on a 1099 basis rather than W2, and we always encourage it. You may receive a 1099-K or 1099-MISC if you are freelance, self-employed, own your own business, receive contract income, engage in e-commerce, rent on Airbnb, or for a variety of other activities. We will go into some more detail as to the benefits of this type of reporting & some of the available deductions below.
Tax Strategies for 1099-MISC or 1099-K:
Filing as 1099s is a great opportunity to write off ordinary & necessary business expenses that you otherwise would never be able to write off as a W2 employee.
Mortgage & Vehicle Savings
1099s allow you to expense part of your rent or mortgage. They also allow you to expense business use of vehicles.
Pay Fewer Taxes
1099 income also provides an opportunity to take by far the largest deduction for income-heavy business – a SEP IRA. The maximum deduction is $56,000.