Really – I Have to Pay Taxes on This? – Form 1099

There are a number of different 1099 forms and chances are pretty good that at least one will be making its way into your mailbox (be it the actual one at the curb or a virtual one) over the coming weeks.  These forms cover a large range of money that you may have received during the year and include things from interest income to dividends to tax refunds to real estate transactions.  The most mysterious of these, however, may be the 1099-MISC from that reports miscellaneous income.

I think that many have their first introduction to this form come in a negative way. Wait, what’s this? I have to report this money that I got months ago, and only now pay taxes on it?

Well, yes.  And you may have to pay self-employment tax on this income.

Beyond that, however, there may be money that you received over the last year that did not result in someone needing to send you that 1099 form, but chances are to be completely legal, the IRS would require you to still report that income if you want your return to be valid in their eyes.

Yes, it may feel unfair that you have to pay taxes on this money. Yes, it may feel strange that with any money you ever receive, you should default to thinking that taxes will be owed on it. This, though, is just another one of those topics that show why it is best to have a tax professional on your side when you try to navigate these waters.

Growing up, I thought of these forms as what people received for their side hustle; they had a real job they went to from Monday to Friday, did something else smaller to supplement their income, and this form showed up at the beginning of year when it was time to account for that.  More and more people, however, are finding their way through the modern economy with only income of this 1099 nature.

The Bureau of Labor Statistics published data in August that said nearly 15 million people are self-employed.  This makes up about 10 percent of U.S. workers, which is a number that I found rather surprising.  Granted, my profession brings me into contact with many people who are working in such a way and need help to make sure they are handling their finances correctly, but I had no idea how large a portion of the work force these people constituted.

On one side of this, I am thrilled by it.  The idea that one can plot their own way through life, choose what they want to do, and succeed in doing so lines up with much of what we believe is inherently great in our country.  On the other side, however, I am afraid that this might mean there is a great number of people blazing this path who are unaware of just what their tax burden is.  Sadly, lacking this knowledge could lead to the end of the dream where you blaze your own course.

So if you are someone worried about what your upcoming tax bill is going to look like, or just what money you made that will be taxed, this is the time to tackle those questions.  At least now you are giving yourself some time to get the money together if you are facing a large bill you did not count on. And, as always, I am always here to help you answer all those questions.