Navigating the Tax Form Labyrinth

It’s that time of the year again. No, we’re not talking about Groundhog Day. Instead, it’s the beginning of tax season. A time when unsuspecting innocents like you must navigate a veritable maze of obscure forms and statements that would make six more weeks of winter feel like a summer vacation.

Fortunately, unless your tax situation is inordinately complex, you won’t need to worry about the plethora of tax forms that could potentially reach your doorstep. For most taxpayers, a few relatively simple forms are all that’s needed to file your taxes — with a minimum of weeping, wailing, and gnashing of teeth.

The most popular of these forms is the ubiquitous W-2, which provides details about your total wages, taxes withheld, and deferred compensation to retirement plans for the year. If your job is your only source of income, the W-2 may be the only form you need to file your taxes. All sources of employee income will go on line 7 of your 1040 return.

However, most people don’t have it so easy. In addition to your salary, you probably have income from other sources, such as interest from a bank account, dividends and capital gains from stock or mutual funds, or earnings from a part-time business or contract work. If this is the case, you should be receiving at least one, if not several, of the seemingly infinite number of 1099 tax forms the IRS uses to keep track of your total annual income.

The 1099-INT form is used to document interest income from all sources, such as bank accounts, certificates of deposit, and savings bonds. You should receive a 1099-INT form from each bank or other financial institution that paid you at least $10 in interest over the course of the year. If you received less than $10 in interest, you will not receive a 1099-INT, but you must still report that income. Interest income will be reported on lines 8a and 8b of your 1040 statement.

After the 1099-INT, one of the most common tax forms people get is the 1099-DIV, which documents your dividend income for the year. Just like the 1099-INT form, a 1099-DIV will be sent if you received at least $10 in dividends from a specific stock or mutual fund that you hold in a taxable account. You will also get this form if you received capital gains distributions from a mutual fund or a real estate investment trust. Speaking of capital gains, if you had a profit or loss from the actual sale of an investment asset — as opposed to a capital gains distribution from an asset that you still own — you will also receive a 1099-B form. Use the information from this form to fill out Form 8949 and Schedule D. Dividend income will ultimately be reported on lines 9a and 9b, while capital gains will be reported on line 13.

Finally, if you are a sole proprietor or independent contractor, you will receive a 1099-MISC from each company that paid you at least $600 during the year. You will need this information to fill out both Schedule C to determine your net profit from your business and Schedule SE to determine the amount of Social Security and Medicare taxes that you owe. Once again, just like with interest and dividends, business income must be reported, even if you don’t receive a 1099-MISC form, unless the total earnings from your business was less than $400 and you are not otherwise required to file a return. This income will be reported on line 12 of your 1040 statement.

This only scratches the surface of the types of tax forms you may receive this year. For instance, you could also receive Form 1099-G (state and local income tax refunds), Form 1099-R (pension payments and retirement account distributions), Form 1098 (mortgage interest), or a 1098-E (interest on student loan debt) — this list goes on and on. Taxes are an incredibly complicated subject, and if you need some help in deciphering the enigma that is the U.S. tax code, don’t hesitate to contact a tax professional, who can help you organize all the necessary forms and statements that are required to file a complete return.

Are you nervous about your investments or retirement? Checkout the free guide below: