1099 Tax Software Blog

IRS Form W-2G is used to report certain gambling winnings.

Form W-2G is printed with black ink. You can download a fillable PDF of Form W-2G from the IRS website, fill out the form and print. Form W-2G is different from the IRS Forms 1098 or 1099 where you must print just the data on top of the red-ink forms. 1099 forms contain a special red-ink that scans. You can’t download and print a 1099 form and paper file. The IRS will reject it. You also can’t print the 1099 forms with red-ink from your printer; the red-ink that is pre-printed on these forms is a special red-ink that you can’t buy in an ordinary office supply story.

Form W-2G shows for the payer name, address, TIN and phone number followed by the winner’s name, address and TIN. The winner’s TIN is shown in Box 9. The other 13 boxes report:

Box 1. Reports gross winnings.

Box 2. Reports federal income tax withheld.

Box 3. Reports type of wager. The wager codes are taken from the table below:

1. horse race track (or off-track betting of a horse track nature)
2. dog race track (or off-track betting of a dog track nature)
3. jai-alai
4. state conducted lottery
5. keno
6. bingo
7. slot machines
8. poker winnings
9. any other type of gambling winnings

Box 4. Reports the date the winning transaction.

Box 5. Reports the transaction number. For a state-conduced lottery, you would enter the ticket or identifying number. For keno, bingo and slot machines, enter the tick or machine serial number or any other information that will help identify the winning transaction. The payer is limited to 15 characters in length in reporting this transaction number.

Box 6. Reports the race (or game) relating to the winning ticket. This box can be left blank.

Box 7. Reports winnings from identical wagers.

Box 8. Reports cashier number or initials of the cashier making the winning payment. This box can be left blank.

Box 10. Report window number or location of the person paying the winning payment.

Box 11. Reports first identification number of the person receiving the winning payment.

Box 12. Reports second identification number of the person receiving the winning payment.

Box 13. Reports payer’s state identification number.

Box 14. Reports state income tax withheld. This information does not need to be reported to the IRS.

Typically the winner signs Form W-2G and returns it to the payer. It is the payers responsibility to file Copy A of this information either by paper or electronically to the IRS. A 1096 or summary is also required.

Form 1098-E serves as the Student Loan Interest Statement and is used for claiming the  Student Loan Interest Deduction. If you have been repaying student loan debt to institutions such as Sallie Mae or American Education Services, you are entitled to claim the interest paid as a deduction on Form 1040 or 1040A.

You will receive a 1098-E if the interest you paid on a student loan in a given year exceeded $600. Form 1098-E is available directly through the web portal of your loan servicer or you can request a paper copy. If you have been repaying your loans strictly online, then your Form 1098-E will not be mailed to you and instead is available on the loan servicer’s website.

Please note, if the student has been listed as a dependent by another taxpayer the student becomes ineligible for this deduction. Similarly, the taxpayer who claimed the student as a dependent is also unable to claim the Student Loan Interest Deduction.

What information is reported on a 1098-E?

Your loan servicer’s information and federal identification number should be clearly outlined in the Recipient’s/Lender’s box. This information is completed by the issuer of the 1098-E and you can use this as a checklist to confirm that you have received all of your 1098-E forms if you have multiple loan servicers.

Underneath the loan servicer’s information is your personal information including name, address, social security number, and account number used for your student loan. Review this information and If anything is incorrect on your 1098-E, contact your loan servicer directly to settle the discrepancy. The IRS is not able to assist with these matters.

Box 1 of the form reflects the total amount of interest you can claim for the tax period. Sometimes this number may not be the exact amount of interest you paid if the covered period has come to a close, i.e. the first 60 months that your loan is in repayment not including deferment, forbearance and other graces.

In general, Box 2 does not concern most student debtors. Box 2 is checked if there are no interest payments included loan origination fees or capitalized interest before Sept 1, 2004. If the box is checked and you believe you are entitled to a deduction, consult Pub. 970 for more information about deductible loan origination fees or capitalized interest.

How do I claim the Student Loan Interest Deduction?

Reflect the exact amount reported on Form 1098-E in Box 1 to ensure no conflicts between your taxes and what’s been reported to the IRS already. Fill in line 33 of Form 1040 or line 18 of Form 1040A. There is no line on Form 1040-EZ to claim the Student Loan Interest Deduction.

If you believe you have paid more interest than shown in Box 1, contact your loan servicer. Do not put an amount that does not match the reports given to the IRS. Please note the warning that is printed directly on your 1098-E that says overstating your deduction could result in action by the IRS.

Do I submit my 1098-E with my 1040 return?

Financial institutions, government agencies and educational institutions provide you with a 1098-E to keep for your records. The loan servicer sends the IRS the information directly and you must not affix it to your return. Report the exact amount of the summation of all your 1098-E forms on the appropriate lines and hold on to the forms for your records.

IRS Form 1096 is a one-page, summary or compilation sheet that shows the totals of the information returns that you are physically mailing to the IRS.

You need to submit a separate 1096 for every type of information return you have given to a recipient, even if you only prepared one of each kind. For example, if you prepared and submitted two 1099-MISC forms and one 1099-R form (for retirement payments), you must submit a 1096 summarizing the 1099-MISC forms and another 1096 summarizing the 1099-R form.

If you are filing by paper, you need to submit Form 1096 with the information returns you are submitting.  You must submit the RED ink form to the IRS. Do not download and print a 1096 from the web and submit, even if your printer can print the form in red color.  The red-ink forms are used for scanning and the red-ink that the IRS uses is different from the red colored ink that you can purchase at an office supply store.

If you are filing electronically, the 1096 will be automatically created and transmitted with any information returns that you are sending.

Who must file Form 1096

Any person or entity who files, by paper, forms W-2G, 1098, 1098-E, 1098-T, 1099-A, 1099-C, 1099-CAP, 1099-DIV, 1099-G, 1099-H, 1099-INT, 1099-LTC, 1099-MISC, 1099-OID, 1099-PATR, 1099-Q, 1099-R, 1099-S, 1099-SA, 3921, 3922, 5498, 5498-ESA, and/or 5498-SA, must prepare and submit Form 1096 as well.

Form 1096 due dates

The due date depends on which information returns you are submitting.  File Form 1096:

• With Forms 1099, 1098, 3921, 3922 or W-2G no later than the end of February each year along with the applicable returns which the form summarizes
• With Forms 5498, 5498-ESA or 5498-SA by June 1

If you are filing electronically, you have an additional month to file Form 1096 and can seek an extension of time.

How do I complete Form 1096?

Enter the name and address of the filer.  This filer information must be the same as the information you enter in the upper left area of Forms 1099, 1098, 3921, 3922, 5498 or W-2G.

Enter a name of a person to contact, and an e-mail address, phone number and fax number.

Box 1 or 2. Enter the Employer ID Number (Box 1) or Social Security Number (Box 2), if you don’t have an EIN. Enter data in Box 1 or Box 2 but not both. Again, this TIN must be the same as the TIN you used in the upper left area of Forms 1099, 1098, 3921, 3922, 5498 or W-2G.
Box 3. Enter the total number of forms (not pages) you are submitting with this 1096.  The 1098, as an example, has 3-forms per page.  If you complete all 3-forms on that 1-page, enter the number “3” in Box 3.  If you complete 2 of the 3-forms on that 1-page, enter the number “2” in Box 3. Box 4. Enter the total federal income tax withheld on all the forms you are submitting. If you didn’t withhold any federal income tax, indicate “0”.
Box 5. Enter the total amount of reported payments on all the forms you are submitting. Leave this box blank if you are filing Forms 1099-A or 1099-G.

In Box 6, enter an “X” in the box for the type of form you are submitting. For example, if you are submitting 1099-MISC forms, enter an X in the 1099-MISC box.

The last question asks if this is your final return. Enter an “X” for question 7 if you are not be required to file Forms 1099, 1098, 3921, 3922, 5498 or W-2G by paper or electronically in the future.

Don’t forget to sign and date the form.

IRS Form 1098 is also known as the Mortgage Interest Statement.  The form is used to report mortgage interest of $600 or more (including certain points) that was earned in the calendar year.  The lender is the payer while the borrower is the payee.

The form contains 3 pages of information and is usually held together by a perforated edge.  The first page is Copy A.  Copy A is a red-ink form.  If you are paper filing, you can print your data on top of Copy A and mail the Form 1098 along with the 1096 to the IRS. Copy B is sent to the borrower.  Copy B can be printed on plain paper with black ink.  Copy C is retained by the lender and can also be printed on plain paper with black ink.

The top part of the form asks for the lender name, address, phone number and TIN.  Then the borrower name, address and TIN followed by the account number.

There are 4 boxes on the IRS 1098 form.  Each box is discussed below:

Box 1:  Shows the mortgage interest paid from the borrower to the lender during the calendar year. This amount does not include points, subsidies or any deductibles.

Box 2: Shows the points paid on purchase of principal residence.  What are mortgage points?   A mortgage point is a charge that the borrower pays in order to obtain a mortgage on a home.  One mortgage point is a fee that is 1% of the total amount of the loan.  Lets say the borrower wants to borrow $250,000 to purchase a house.  One point on a $250,000 loan is $2,500.  Mortgage points are tax deductible as a home mortgage interest if the deductions are itemized on Form 1040, Schedule A.

Box 3: Shows any refund of overpaid interest that the borrower made in a prior year or years. The borrower can not deduct this amount.

Box 4 is blank and can show any additional information that the lender in this case wants to show on the form.  You can show the property address, real estate taxes or insurance paid from escrow or anything else.

The borrower may deduct only the amount she or she paid and points paid by the seller that represent his or her share of the amount allowable as a deduction.

RS Form 1099-A is used to report Acquistion or Abandonment of Secured Property.

Form 1099-A has 3-pages of forms that are held together by a perforated edge. The first page is Copy A and that is sent to the IRS.  Copy B is sent to the borrower and Copy C is retained by the lender. You can detach Copy A from the rest of the forms and print just the data on top of Copy A and print.  If you are filing electronically, you are exempt from using the red-ink forms.  Copy B and Copy C can be printed on plain paper with black ink.  Both Copy B and C do not need to be in the same layout as the IRS form.  The boxes can be moved around or arranged differently on the form; what is important is that all of the information is shown on the form and transmitted to the borrower.

The top part of the form shows the lender name, address, phone and TIN followed by the borrower name, address and TIN.  The account number is also displayed.

Then there are 6 boxes of information.  Box 3 is shaded and nothing is expected for that box. The other boxes are discussed below:

Box 1. Shows the date the lender’s acquired or had knowledge of abandonment.

Box 2. Shows the balance of principal outstanding.

Box 4. Shows the fair market value of the property.

Box 5 is checked if the borrower was personally liable for repayment of the debt.

Box 6. Shows the description of property.

In 2008, there were many fraudelent filings of the 1099-A and 1099-OID.  We met with the IRS several times and the IRS we met with said that individuals should never file IRS Form 1099-A and instead only banks or financial institutions.  We agreed that we would sell the 1099-A software to Banks or Financial Institutions that provide:

1. The name of the bank and/or financial institution.
2. A valid FDIC number and/or ABA routing number of that bank and/or financial institution.

Furthermore, after ordering, we will only provide a passcode to register the software only to an employee from that bank that purchased the software.  We will e-mail an employee of that bank or financial or call them and provide a passcode. These two conditions prevent us from selling the software to individuals, which is what the IRS wants.

Form 1099-B is an information return that the Internal Revenue Service requires to be filed for the gross proceeds of the sales of option shares in non-retirement accounts minus or including a contingent deferred sales charge (CDSC) and redemption fees.  Most commonly, mutual fund withdrawals and stock sales are reported with Form 1099-B.  However, several other stock related transactions should be reported on Form 1099-B.  Form 1099-B is not used however to report capital gains or losses.  The 1099-B information return is used to complete Schedule D on Form 1040 which requires the reporting of option shares.

Generally an employee’s broker will complete the 1099-B after the sale of option shares and send it to the payment recipient.  The broker may choose to report the transaction amount including transaction fees or excluding transaction fees.  If the broker chooses to report the proceeds including transaction costs, the person receiving the 1099-B form should add the fees to their cost basis on their Schedule D.

IRS Form 1099-B consists of 3-pages with 2 forms per page.  Copy A is a red-ink form that the broker can paper file with the IRS.  Do not download Copy A from the Interal Revenue Service website and print and submit.  Even if your printer can print in a red-colored ink, it’s not the same ink that the IRS uses to create Copy A.  The official printed version of the IRS form is scannable, but the online vrsion of it, printed from a website, is not. A penalty may be imposed for filing forms that can’t be scanned. Copy B can be printed on plain paper with black ink and is sent to the recipient.  Copy C is retained by the broker.

For brokers, each recipient of option shares must receive a 1099-B.  The form must be sent by the broker to the payment recipient by January 31 of the year after the calendar year in which the transactions being reported occurred.

Form 1099-B must be paper filed to the IRS by the end of February along with Form 1096, Annual Summary and Transmittal of U.S. Information Returns.  If you file electronically, you have until the end of March.  You can go online and file for an extension taking the due date to the end of April if you need more time.

If the recipient of the proceeds is a nonresident alien, you may have to withhold federal income tax.

IRS Form 1099-C is used by creditors (such as the federal government, banks or other financial institutions, credit card companies, or credit unions) to report debts that are cancelled to debtors that exceed $600.

The debtor is required to include this amount as income. If the debtor had a debt written off and did not receive a 1099-C form, it is likely that the form was still reported to the IRS, and the creditor should be notified.

Not every type of forgiven debt is considered to be taxable by the IRS.  Although a 1099-C form is still required to be submitted to the IRS by creditors for all debts written off that exceed $600, the debtor in some situations is not required to report the cancelled debt as income.

For example, the Mortgage Forgiveness Debt Relief Act of 2007 allows certain exemptions for reporting forgiven debt relating to foreclosed homes.  If the cancelled debt was intended to be a gift, the debtor is not required to report it as income.  Any debt that was discharged in a Chapter 11 bankruptcy would be excluded from reporting requirements.  If you are insolvent, or if your debts exceed the value of your assets before the creditor agreed to write off your debt, you are not required to report that cancelled debt as income on your tax return.

1099-C forms are required to be submitted to the debtor by January 31.  The deadline for paper filing to the IRS is typically the end of February.  If you decide to efile, you have an additional month to submit the data; the deadline for efiling is typing the end of March.  You can request an 30-day extension online taking the due date to the end of April.

1099-C software at 1099fire.com creates original, replacement and corrected files in the format required by the IRS for electronic transmission. The system is updated each year to reflect the format changes that are made by the IRS.

You can file electronically whether you have just one information return or millions.  The IRS encourages everyone to file electronically and requires businesses with more than 250 information returns to electronically file.

Form 1099-R is an Internal Revenue Service information report used to payers to report distributions from annuities, IRAs, profit sharing plans, insurance contracts, retirement plans, and pensions to recipients.  Form 1099-R also shows capital gains that are related to these distributions, and it shows any insurance premiums or contributions made to the plan by the plan holder.  Any distribution exceeding $10 is required to be reported by payers on Form 1099-R.  A separate 1099-R form should be prepared for each type of benefit in which a payment was received, and for each recipient of a benefit.  The type of benefit is noted in Box 7 of Form 1099-R.

Form 1099-R is used by the IRS to track these payments to recipients and match income data from the payer and payment recipient.  The 1099-R form may be used by the payment recipient to help complete his or her own tax return, or be sent to a tax preparer for assistance with the preparation.  Form 1099-R should be sent to the payment recipient by January 31 of the year following the calendar year that the payments were sent.  It is due to the IRS along with Form 1096 by February 28.  Instead of paper filing, you can file electronically and have an additional month of time taking the due date to the end of March.  You can also file for a 30-day extension giving you until the end of April to file electronically. Along with the payment recipient, the IRS and the state tax or revenue departments should receive a copy of the completed 1099-R form.

1099-R software at the site 1099fire.com makes it easy to import, print and/or efile IRS Form 1099-R quickly and easily. File unlimited 1099-R’s electronically with the IRS. 1099FIRE software creates files in the format required by the IRS for electronic transmission. The system is updated each year to reflect the format changes that are made by the IRS. 1099FIRE is the only company to offer OneTouch E-Filing. Just click a button and the software will automatically log in and upload your file to the IRS FIRE system. You will receive verification within seconds of receipt of your file.

There are a number of tax incentives that can help individuals save money on healthcare related costs. Medical Saving Accounts (MSAs) and Health Savings Accounts (HSAs) can be used to save money on healthcare expenditures. When funds from those accounts are used, the distributions must be reported on a 1099-SA form. Not everyone can contribute to a MSA or HSA; you must have a high deductible health plan and cannot be a recipient of Medicare. You also cannot be claimed as a dependent on another person’s tax return. If a person meets these requirements and is also employed, his or her employer can make tax-free contributions to the MSA or HSA as well.

MSAs are the predecessors of HSAs and were discontinued on December 31, 2005. Both types of accounts are both very similar and are both tax deductible savings accounts that can be used for several health expenses without tax penalty. Both accounts require a high deductible health insurance plan, and they can also double as retirement accounts that can be drawn after the age of 65 without tax penalty. HSAs have a minimum deductible requirement of $1,150 for individuals and $2,300 for families. There is a maximum annual contribution limit for both HSAs and MSAs, and excess contribution can result in additional taxes and/or IRS fees.

If money is received from a HSA or MSA, it is not taxable as long as it is spent on “qualified” medical expenses. The IRS does not provide that many specific details on what medical expenses it considers to be “qualified”. The IRS says that an expense can be considered qualified if it can be reported as an itemized deduction on Schedule A. Medical treatment on any part of the body is considered to be a qualified medical expense. Generally, any money received should be used toward preventing, diagnosing, curing or otherwise treating a disease.

If an individual receives a 1099-SA that shows that the distribution was not used for qualified medical expenses, income tax will be paid on the amount. MSAs are subject to the same taxation rules as HSAs. Form 8889 is required to be completed when a distribution is taken from a HSA. Both taxable and non-taxable distributions are reported on this form. Taxable distributions are subject to a 20 percent additional tax. It is recommended to consult with a tax professional while completing Form 8889 as well as related tax preparation regarding Form 1099-SA.

The IRS requires governmental agencies to report some types of payments that they have made during the year since those payments may be considered taxable income for the payment recipients.  Unemployment income is considered to be taxable and has to be reported every year, even if the benefits have been partially or complete repaid. Form 1099-G is mailed to those who have received unemployment benefits at any point during the tax year.

Similar to other 1099 forms, Form 1099-G is used to report income outside of what would normally appear on a W-2 form. A copy of 1099-G is issued to the income recipient along with the IRS. Individuals may also receive a Form 1099-G if they claim state income tax as a deduction and received a refund or credit. For those who use itemized deductions on their tax return, state income taxes paid may be deducted. If the state tax deducted on a tax return is refunded later on, the refunded amount must be reported as taxable income. This is one purpose of Form 1099-G.

Only income from government sources is reported on Form 1099-G. The government agency that issued the income is usually the one that fills out and sends the form to the IRS. Taxable payments can include disability insurance payments, unemployment assistance benefits, and paid family leave benefits along with standard unemployment. Other types of income that might be reported on 1099-G include state local tax refunds or credits, trade or wage subsidies, payments from state tuition programs, and more.

There are 9 boxes on the form that separate each type of payment. Unemployment compensation must be reported on a tax return, and unemployment income can be found in Box 1 on Form 1099-G. Tax credits or offsets that are found in Box 2 are also reported on a tax return. Boxes 4, 10a and 10b, and 11 have information about state, local and federal income tax withheld from any payments that were received. Box 5 shows trade adjustments, and Box 6 shows any grant income received that may be taxable. It is not necessary to attach your 1099-G form to a tax return.

Amounts reported on a 1099-G form must be reported on a federal tax return for the year that the amount was received. Form 1099-G is submitted to the taxpayer by the end of January and it does not need to be submitted to the IRS until February. Software such as the software offered at 1099FIRE.com can help government agencies complete their 1099-G Forms.