Nearly 50% of people admit to making mistakes in their taxes, even after they’re complete.
If you want to avoid making a simple mistake and paying more in taxes, you must identify which forms to file. Since there are different tax forms for the same file number, you don’t want to overlook the details. Some of the most commonly filed options are 1098 and 1099.
Keep reading to discover the essentials between 1098 vs 1099 forms.
What Is the Purpose of Each Form?
Although it can be overwhelming, IRS documents are organized and apply to most situations if you look hard enough.
The Form 1098 is often called the Mortgage Interest Statement. It reports a person’s total amount of interest and expenses for mortgage costs. When preparing your taxes, you must only use the previous tax year’s information.
1099 forms serve a much different purpose, as they include info about your income from your employer. Depending on your employment, you may need to complete various forms individually. When you acquire property, sell, or exchange investments, you will need to file this paperwork.
Learning more about what is a 1099 form will prevent you from overlooking any details. If you want to make the most of your tax returns and prevent issues with the IRS, take a look at the variations below.
Different types of tax forms are used for the 1098 and 1099 documents.
1099 tax forms come in more than 20 variations, but not all are common. Below are some of the most used forms, along with some of the different versions of the 1098. Read further to discover which documents you can’t miss while filling out tax forms.
If you own stocks or mutual funds, there’s a section of the 1099 that applies to your finances.
Anytime you have income from investment dividends and brokerage accounts, they must complete this form. Financial institutions mail out 1099 DIV forms no later than mid-February, so check your mailboxes around this time.
If you’ve made your dividends through a broker, compare your numbers with their year-end statement.
Whether you’re living off of pension checks or not, you may still need to file this form.
The 1099 R is used to report retirement account distributions to the IRS. When people pull from their accounts or earn interest, it impacts their tax return. Pensions, annuities, and IRAs fall into this category as well.
If you have any gift annuities to report, the 1099 Rs will provide a section to do so. Insurance contracts are another, less common, use of this document.
You must file a 1099 INT for any interest you’ve earned, that’s at or above $10.
When you earn interest from a bank, such as through a savings account, you will see it in your statement. Check your bank documents for December and January, as this is the standard time to send them. It’s common for these statements to be sent electronically because so many people report them.
If you’re searching for an easy way to remember this form, the “G” represents government.
Although you may not be a government employee, you may still need to file this document. The 1099 G reports government payments. This can include tax refunds, unemployment compensation, and agricultural payments.
If you or your business received taxable grants in the previous tax year, you will also want to complete this document. Federal, state, and local government payments fall into this category.
When filing taxes, the terminology can get a bit tricky.
You can remember the 1099 B form, however, since the “B” stands for barter or broker exchanges. If you make any sales or profits from brokerage securities or exchanges, 1099 B will help you report it.
If you sell stock, this form will also be necessary to complete. Whether you’ve had gains or losses, you must report your numbers to the IRS. If you need help organizing Balanced Asset Solutions, a CPA can offer assistance.
Have you made income but can’t find the right category from the forms above?
The 1099 MISC form is flexible enough to capture all of the remaining reports. This is one of the most commonly used forms, as it must be filed when you make more than $5600 in the tax year. Freelancers, business owners, and artists use this form to report earnings, especially when they don’t receive a W2 form.
Non-employee compensation can be a tricky thing to file come tax season.
If you’re a freelancer, gig worker, or self-employed, you might need to file this document instead of the MISC form. When sales reach $5,000 or more, independent contractors must offer as much info as possible to the IRS.
You can either use Form 1099 MISC and mark box 7 or report your earnings with this document. The 1099 NEC is often the most common choice because it’s straightforward.
The 1098 E is used to report the amount of interest paid on student loans.
You can reduce the total amount owed for federal income taxes if you prove you’ve paid the interest. These statements are sent by your student loan servicers. They can be sent electronically or through the mail.
Completion of this form could result in tax credits and deductions. It’s in your best interest to complete it if you have student loans.
The 1098 T is often confused with the 1098 E, but it goes beyond the interest.
Tuition payments, grants, and scholarship reporting should be made on this form. They are sent by your student loan service provider, so you’ll recognize the name when you get it in the mail. This form can result in deductions for taxes and beneficial credits.
Telling the Differences Between 1098 vs 1099 Forms
With so many variations, it can be difficult to see the differences between IRS forms 1098 vs 1099.
Understanding the purpose of each can help you increase your tax return, or at least lessen what you owe. As you start receiving tax documents, keep them organized until tax time so you can quickly pull the numbers you need.