Will the IRS catch a missing Form 1099 DIV? Have you invested in shares in an organization? Do you earn distributions? You will receive a 1099 DIV Form at the year-end. Yes, the dividends you have earned are apart from regular salary or wages. Hence, it is a kind of 1099 income.
Getting tense? Don’t worry! Receiving an information return is a tedious task. We will let you know the circumstances in which you receive a 1099 DIV. We also provide you information about the reasons behind IRS audits.
When do you receive an IRS Form 1099 DIV?
At the end of January, you will receive Form 1099 DIV for receiving dividends on the investments of shares or stocks $10 or more. Furthermore, the bank, or mutual fund organizations, or any financial institutions issue these tax forms. As we know, dividends are the organization’s profits distributed to the shareholders who make investments in shares or stocks. Here are the circumstances in which you will receive an IRS 1099 DIV:
- Capital gain dividends or exempt-interest dividends or any other distributions paid to an individual in money or other property.
- Withheld or paid foreign tax on dividends or distributions.
- Paid money or other property as a part of a liquidation.
Why will I get audited if I forgot a 1099 DIV information?
1099 information returns remind and notify you to report the income on your tax returns annually. Because these 1099 Tax Forms are sent to the individuals and to the IRS every tax year. The IRS matches every 1099 DIV Form with your SSN. In this way, the IRS can easily find out an underreported income.
If you forget to include the distributions you received throughout the tax year, then the IRS can spew out a tax bill. Hence, you will get audited or you will receive a tax notice from the IRS stating “unreported 1099 income”. Thus, the best way to avoid receiving notices from the IRS is to report 1099 income on the tax return.
Do I need to report 1099 DIV income if I didn’t receive 1099?
Yes, you need to report income earned apart from the regular salary on the tax return. Generally, you will receive a 1099 DIV Form if the income you have received meets the reporting threshold. Suppose, if you earned income less than the minimum reporting threshold, then you’ll not receive 1099.
But this doesn’t mean you are exempted from reporting 1099 income on the tax return. Instead, it will become underreported income. Therefore, you will end up paying penalties and fines that are heavy and hefty. Because the IRS recommends every individual to report the income on their tax return even if they didn’t receive 1099.
What if your 1099 DIV Tax Form reports an incorrect amount?
Generally, every 1099 Tax Form is issued to you and to the IRS. So, if you receive a 1099 DIV with an incorrect amount reported on it, then you will get audited. Yes, the IRS considers that you are not including the income earned in the form of distributions.
Hence, the IRS sends you notices to pay penalties. To avoid unwanted penalties, contact the payer and tell them to correct the mistake. Otherwise, contact the IRS by providing the proof of payments you received in a tax year. Thus, by contracting immediately with your payer or the IRS you can minimize the chances of unwanted penalties.
What you should do to avoid IRS audits on 1099 DIV income?
To avoid, IRS audits follow the below steps:
- Determine whether you are working as a contractor or employee. If you are an employee, then employers withhold taxes on your behalf. In case, if you are a contractor, report the income on the tax returns.
- Check your mail whether you have received a 1099 Tax Form or not.
- If in case, you didn’t receive and the income you have earned throughout the year is $400 or more, then include the income on the tax return.
- When you receive a 1099 Form, check the amount reported on the tax form whether it is correct or not. Otherwise, contact the payer and request a corrected 1099 Tax Form.
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