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10 Information returns (1099 & K-1's)




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This article is from the US Taxes FAQ, by Wayne Ross wayner@metronet.com.

10 Information returns (1099 & K-1's)

You are required to report income whether or not you
receive a 1099. Although information returns may make preparing
your return easier that is NOT their primary purpose. The purpose
of information returns (Forms 1099, etc.) is to help the IRS
collect taxes due.

You are responsible for reporting the correct income
amount on your return regardless of the amount reported on Forms
1099. The IRS matches the income you report with that shown on the
1099's it receives. If an erroneous 1099 is received, you should
first contact the payor and request them to send you, and the IRS
a corrected information return.

If the payor does not comply with your request and the
amount is significant, you might send the payor a certified letter
setting out the error and attaching copies of any supporting
information. The purpose of the letter is to get the payor to issue
a corrected information return, and to have written proof for the
IRS that you tried to set the matter right.

Retain a copy of your letter, so that if, and when challenged
by the IRS, you can demonstrate your good faith attempt to correct
the situation. You may wish to file a copy of the letter with your
return as well, although the computer matching system seems to
ignore some return attachments.

Forms K-1 are specialized information type returns filed by
so-called pass through tax entities, i.e. (partnerships, trusts,
some estates, and small business corporations). Like a 1099
their purpose is to show the amount of income, deductions, etc.
attributable to, and reportable by individuals with an interest in
the issuing entity.

K-1's are lengthy forms which show information by type,
and indicate where on your 1040 each item is to be reported. Some
K-1 deductions and credits may not apply to you, if for example you
do not itemize your deductions. You should read the applicable
instructions, contact the issuer or your tax advisor for specific
questions.


 

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