How to Read Your Form 1099-DIV

How to Read Your Form 1099-DIV. Many investors who receive dividend income are confused by the way this income is broken down on the 1099-DIV form. This article explains how to interpret the numbers in each of the commonly used boxes on this form. Have a question? Get an answer from tax advisor now!

Instructions

Earned Income Tax Credit

1 - Look at box 1a of your 1099-DIV. This box is labeled "ordinary dividends." This means that the income reported in this box is taxed as ordinary income. Ordinary income is always taxed at your top marginal tax rate. This income is reported either directly on the form 1040 or on Schedule B.

2 - Box 1b of your form is labeled "qualified dividends." These are dividends that qualify for the lower 15 percent or zero capital gains tax rate. They are reported separately on the 1040.

3 - Box 2a shows total capital gains distributions from a mutual fund or real estate investment trust (REIT). This income will be reported either on Schedule D or directly on your 1040.

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4 - Boxes 2b and 2c are used to report capital gains or income recapture from various types of real estate transactions. This type of income is much less common than the type of income realized in the previous boxes.

5 - Box 2d will contain the amount of capital gain received from the sale of a collectible or antique item. This type of income never qualifies for capital gains treatment, regardless of your holding period or tax bracket.

6 - Box 6 shows any foreign tax that has been paid to other countries. This is usually the result of investing in an international or global mutual fund, but can be from any type of foreign investment.
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How to File Taxes with Form 1099-Misc

When you get ready to file your taxes and you only have to file taxes with form 1099-Misc, you need to know where to enter this income. Besides knowing where to enter the information, you must know what other tax obligations you have that pertain to the 1099-Misc form. If you are an independent contractor who receives a 1099-Misc, you could be subject to self employment taxes and may be able to claim expenses on Schedule C that pertain to the business you conduct.        Have a question? Get an answer from tax advisor now!

Instructions

Schedule C Profit and Loss Form Business

1 - Start the Schedule C by filling in the top portion of the form with your personal information. In Part 1, enter the income that you have entered on the 1099-Misc. On line 7, total lines 1 through 6 to find your gross income.

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2 - Enter all expenses on lines 8 through 27 that apply. All expenses must relate directly to the business that you preformed. For instance, an artist may claim paints and studio rent if it is for work only. A writer may claim fees for office supplies that pertain to the business.

3 - Total the expenses on line 28. Subtract line 28 from line 7 (gross income) and enter that amount on line 29. Continue entering the amounts you have on lines 30 through 32. If you have a profit or loss on line 31, enter this amount on line 2 of the Schedule SE and on line 12 of the 1040 form. Enter a loss in parentheses to indicate a negative amount.

Schedule SE Self Employment Tax

4 - Follow the chart on the Schedule SE to see if you must file the short form or the long form. Most people will use the short form unless their income is over $106,800 or if they are a member of a religious order, such as a minister.

Child Tax Credit Information

5 - Enter any profit or loss that you may have from a farm profit (or loss) if this applies on line 1a. Complete line 1b if it applies. Lines 2 is already filled in with the total from the Schedule C. Add lines 1a, 1b and 2 together and enter this total on line 3.

6 - Multiply line 3 by .9235 and enter the total on line 4. If the total is less than $400, you do not owe any self employment taxes. If the total is more than $400, continue to line 5 and 6. Multiply line 4 by .153 if the total on line 4 is $106,800 or less and by .029 if line 4 is more than $106,800. Enter the result on line 5 and on line 56 of form 1040. Divide the total on line 5 in half and enter the result on line 27 of the 1040 form and line 6 of the Schedule SE.
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1040 Form

7 - Enter any other income you have to report on the 1040 form. This includes income such as taxable interest, W-2 forms, tax exempt interest, capital gains or unemployment compensation.

8 - Complete the adjusted gross income on lines 23 through and 37. Complete the taxes and credits on lines 38 through 55. Enter any other taxes you have on lines 56 through 60 and any payments on lines 61 through 71. If you made any estimated taxes during the tax year for the 1099-Misc income, write this amount on line 62.

Tax Deductions Information

9 - Continue the return until you have completed lines 72 through 76 to determine if you will owe money or if you have a refund coming. Sign and date the return. Send the Schedule C, Schedule SE, 1040 and all other schedules and 1099-Misc forms, along with any W-2 forms, the Internal Revenue Service address listed for your particular state.

How to Give the 1099 Form

If you've paid more than $600 to an individual who isn't part of your business, such as a freelancer, there is a good chance you will need to fill out and send them a 1099 form. This form is used to properly report their income to the government, and allows them to calculate the taxes and other withholding necessary to complete their income taxes. Have a question? Get an answer from tax advisor now!
Extension Form 4868

Instructions

1 - Determine whether you need to give the worker a 1099 at all. If the worker earned over $600 from you in the course of business and the worker was operating as an independent contractor, you will need to fill out a 1099.

California Tax Brackets

2 - Obtain a copy of the 1099 form to fill out. These forms are typically available at local libraries for free, or call 1-800-TAX-FORM to be sent a copy in the mail. A link to an informational 1099 is included in the Resources section below.

3 - Write your identifying information in the upper-left-hand boxes of the form. This includes your business name and address, as well as your federal identification number or EIN.

4 - Fill out the contractor's information, which is found below your information. Write the contractor's Social Security number into the box labeled "Recipient's identification number," and write his address information in the boxes below.

5 - Fill out the amount of income the contractor earned, and any federal income tax you withheld for her, in boxes 3 and 4 on the right-hand side of the form. In most cases, you will not have held any federal income tax for the contractor.

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6 - Send copies 2 and B to the worker no later than January 31 of the year following the one in which he earned the income. Send copy 1 to the tax revenue department of the contractor's state no later than February 28.

7 - Send copy A, along with form 1096, to the IRS no later than February 28. This will cover your reporting requirements to the government. You may retain copy C of the form for your own records.

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How to Calculate Taxes on Form 1099-Misc

When you work for a company as an independent contractor, the person or company you worked for will send you a Form 1099-MISC at the end of the year rather than a Form W-2. Because no federal, state, Social Security or Medicare taxes were withheld from your pay, you are responsible for any taxes due on the income. Have a question? Get an answer from tax advisor now!

Instructions

Kentucky Income Tax Brackets

1 - Find your earned income in Box 7 under non-employee compensation. If you were paid royalties, they will be recorded in Box 2 on the form. Box 3 is for any other income you received, which could include bonuses. If you had any federal or state tax withheld, this will be recorded in Box 4 and Box 16, respectively, but most independent contractors won't have entries in those two boxes.

2 - Add the amounts in boxes 7 and 3 to get your total income for the year. If you have more than one 1099-MISC, add all these totals before calculating your tax liability.

3 - Calculate any business-related expenses you had during the tax year and subtract them expenses from your total income. For example, if the total income on Form 1099-MISC is $6,891, and there were no expense deductions and no taxes withheld so the recipient is responsible for federal, state and self-employment taxes on income of $6,891. Multiply $6,891 by 92.35 percent (.9235) to calculate the amount subject to self-employment taxes ($6,891 x .9235 = $6,364).

Tax Refund Calculator 2014

4 - Use the amount subject to self-employment tax to find your self-employment tax liability. If the amount is under $400, you do not owe any self-employment tax. If your total income is over $110,100, multiply the amount subject to self-employment tax by 2.9 percent (.029) and add $10,574 to that amount. If your total is under $110,100, multiply the amount by 13.3 percent (.133) to find your self-employment tax. For this example, the total subject to this tax is $6,364. The formula is $6,364 x .133 = $846. Your self-employment tax liability is $846.

Vermont State Tax Brackets

5 - Figure your federal tax liability on your total income using IRS Publication 15 for the current tax year (see example in Resources). Keep in mind that your federal tax liability will be reduced by a standard deduction or an itemized deduction and/or the earned income credit if it applies to you. You tax liability also can be reduced by other payments and credits.

6 - Calculate how much state tax you owe on the total income (see Resources).
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