3 Tax Forms That Can Accidentally Raise Your Tax Bill
Protect yourself from accidentally increasing your 2017 taxes by being misled by a member of the 1099 family.
Starting your taxes? There's probably a pile of 1099 forms for you to go through. Here's how to avoid increasing your 2017 taxes by being misled by these.
First of all, don't lose any, of course: The IRS gets a copy of each, so if your return is missing one or more, that's going to be a headache.
Number two: They may show a lot of money that looks like income. But often, it's totally tax-free. Make sure you categorize it right. Here are three you might see:
1099-Gs are for government payments. Most of you – those who claimed the standard deduction last year, or if you took the state sales-tax deduction – can totally ignore ones that are for state income tax deductions. Even if you itemize, part of the refund may be tax-free.
1099-Qs are for payouts from education accounts like a 529 college plan. Since education is pricey, these numbers could be big. But so long as you used that money for tuition or other qualifying expenses, it's tax free.
For sure, some of your Social Security benefits are tax free. For lower-income taxpayers, all of it is. Check out IRS publication 915 to get the details on the SSA-1099, or let your tax-prep software figure out the calculations.
There are other kinds of 1099s. See 7 Tax Forms That Can Accidentally Increase Your Tax Bill for more on how to handle them.