One tax item everyone pays attention to is the Form W-2 they’ll receive this year. It reports how much employees were paid in 2011 and how much tax was taken out. You must include a copy with your tax return when you file.
But it’s surprising how many people don’t appreciate that Forms 1099 are equally important. Maybe more. You don’t file them with your return, but the IRS gets a copy of every one. And IRS computers are whirring to match each dollar with your Social Security Number.
It’s time for them to arrive, and you should keep a keen eye on every one so your tax return is accurate. Every year the IRS sends millions of tax notices based on matching 1099s asking for more money. Every other notice or audit activity is tiny by comparison.
Robert W. Wood practices law with Wood LLP, in San Francisco. The author of more than 30 books, including Taxation of Damage Awards & Settlement Payments (4th Ed. 2009 with 2012 Supplement, Tax Institute), he can be reached at Wood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.