Tax Season: Making sense of 1099, 1098, and other tax forms
With tax time on the horizon, you may soon start receiving 1098 and 1099 forms from financial institutions. Don't get overwhelmed — here's what you need to know to make sense of all that paperwork your bank or brokerage firm is sending your way, and what to do with it after you file your taxes.
What is a 1099 form, and why are there so many of them?
A 1099 form reports income received throughout the year. A commonly issued 1099 is the one independent contractors receive from their paying clients. However, there are several other types of 1099 forms. You may receive one or more of these from your financial institution:
1099-INT: reports income received through interest, like from a CD or savings account. Interest is taxed at your ordinary income tax rate.
1099-DIV: outlines income earned from dividend-producing stocks and mutual funds, as well as capital gains. Investment earnings are often taxed at different rates. This form will indicate which earnings fall into which taxable category.
1099-R: lists income from any retirement plan distribution like a 401(k), IRA, pension, or annuity. Retirement plan distributions—except those distributed from a Roth account—are taxed as ordinary income.
1099-S: details any income from a real estate transaction, like the sale of a house. Most home sellers may exclude up to $500,000 in home sale capital gains from taxable income. This form will explain which proceeds, if any, are taxed.
1099-C: indicates the cancellation of a debt. Canceled debt is taxed as ordinary income.
Some of those tax forms sent from your bank can add up to big tax-deduction bucks. Make sure to keep them tucked away in a safe place until tax time.
Typically, financial institutions must provide these forms to customers and file them with the IRS by January 31, with the exception of Form 1099-S, which must be filed by February 15. If you haven't received an expected form a few days after the filing date, contact the issuer.
What other documents might I receive?
Homeowners may receive Form 1098, which lists mortgage interest paid during the year. Mortgage interest on debt less than $750,000 ($1 million for homes purchased before December 14, 2017) is tax deductible.1 Any real estate property taxes paid through an escrow account will also be listed on this form.
If you own an Individual Retirement Account (IRA), you'll likely receive Form 5498, which reports total annual contributions made to a traditional, Roth, SEP, or SIMPLE IRA.
How long do I need to keep a record of my tax filing?
Whether you file online, through a tax professional, or on a paper form, the IRS guideline is to keep your return, records, and receipts for at least three years. However, you should keep them for as long as seven years if your return includes unusual activity, such as a loss for a bad debt or from worthless securities.2
If I'm getting a refund, how can I have the cash deposited into my bank account?
Direct deposit is easy to set up for your tax refund. All you'll need is your bank's routing number (the first nine digits listed on the bottom of your checks) and your account number (the second set of numbers listed at the bottom of your checks). The direct deposit option is available through your tax software — or via Form 8888, if you're not filing through a professional.
Excited to receive your tax refund? You can easily track the status on the IRS website3 or by downloading the IRS2GO3 app. The IRS issues most refunds in less than 21 days.
Important Disclosure Information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
Sharf, S. (2018), How The New Tax Law Will Impact Your Housing Costs, accessed Novemeber 19, 2018.
How long should I keep records, Internal Revenue Service, accessed November 19 , 2018.
Refunds, Internal Revenue Service, accessed November 19, 2018.
IRS2GoApp, Internal Revenue Service, accessed November 19, 2018.
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